AZ Lending Experts LLC

Can I Get a Mortgage if I Had Financial Hardship?

Posted: 2019-05-10 | Author: Richard Simon

In recent years, many people have fallen on hard times financially. The housing collapse that spawned the Great Recession of the late 2000s left many Americans facing job losses, foreclosure, bankruptcy, and other hardships. Even today, roughly a decade later, more than 1/3 Americans have fair to poor credit, with FICO scores below 670.

While the ideal situation for a perspective home buyer is to have a FICO score of 680 or higher and a 20% down payment, this is unrealistic for a large sector of our population. The good news is that you can still get into a home even if you have less than perfect credit, a low down-payment, or you have experienced a financial hardship.

How Soon after a Foreclosure can I Buy a Home Again: Being foreclosed on and having to leave your home is one of the most humiliating experiences anyone ever goes through. And although there is a waiting period before you can qualify for a mortgage again, it may not be as long as you think.

Every situation is different, and today, there are a wide range of loan programs that can help those who have gone through hard times financially get back into home ownership sooner. If you are thinking in terms of a conventional mortgage, you are usually required to wait seven years after a foreclosure before you can get approved again. However, there are loan programs available through the Federal Housing Administration (FHA) and U.S. Dept of Agriculture that only require a three-year waiting period. Veterans Administration (VA) loans require an even shorter wait time of just two years.

For many people who have gone through a home foreclosure, at least two or three years have passed since then as the economy has vastly improved recently. If you are one of those whose foreclosure happened several years ago, there is a good chance you could at least qualify for a government-backed home mortgage.

If your foreclosure was more recently, you may be able to reduce the waiting time before you can qualify for another mortgage by showing that the foreclosure resulted from a significant financial hardship. Legitimate hardships for which the waiting period could be reduced may include a divorce, being laid off from a job, a business that went under, or a serious health condition. You will need to provide documentation about the hardship along with an explanation letter for the lender to review.

Rebuilding your Credit after a Financial Hardship: While you are waiting to qualify again for a home mortgage, you can speed the process along by taking proactive steps to restore your credit. The first thing you should do is obtain a copy of your credit report and review it for inaccuracies. All Americans are entitled to one free credit report per year.

If you find any negative information on your credit report that is inaccurate, you can dispute this information with the three major credit reporting agencies, and have it removed. This alone could give your credit score a significant boost, depending on your situation.

Aside from getting wrong information removed from your credit report, a few other things that will help your score improve include:

  • Pay all of your bills on time
  • Open up some new credit accounts to help reestablish on-time payment history;
  • Keep no or very low balances on all of your credit accounts.

Contact a Local Lending Expert for Assistance: A financial hardship is a temporary setback, but it does not have to be the end of the story. You can bounce back from hard financial times, and you can become a homeowner again, even if your credit is not perfectly restored. To find out what loan programs you might qualify for in your situation, the best place to start is to speak with a local lending specialist. A local expert can provide access to everything that is available in the marketplace, along with personalized guidance to help you make the most informed decision on which path you want to choose.

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