Foreclosure is damaging indeed for an individual’s financial standing. Through foreclosure you not only lose your property, but your credit report also goes down considerably. Foreclosure generally lowers your credit score by nearly 250 to 280 points. People, who don’t want to lose their second home again due to foreclosure, will definitely look forward to mortgage refinance to be on the safest side. However, with a previous foreclosure marked on your credit report, it may turn a bit difficult for you to qualify for mortgage refinancing.
The possible ways to refinance your mortgage loan with your credit report bearing the mark of foreclosure:
It may be bit difficult for you to find out reasonable rates to refinance your mortgage loan after facing a foreclosure. Still, it’s not impossible either to refinance your mortgage loan and avert another foreclosure. Following are some probable ways through which you can refinance your home despite of having foreclosure on your credit report:
- Look for Refinance options by FHA: The mortgage loans issued by the Federal Housing Administration or FHA are considered to more helpful for the homeowners. The credit requirements aren’t that strict like the conventional loans. FHA considers lots of factors like the overall economy, employment rate and the market condition to determine the applicant’s eligibility. So, there is still a chance for the homeowners to qualify for a loan refinance. Even after going through foreclosure, if you’ve been able to manage a credit score around 620, then you can convince lenders for refinance. However, with a credit score below 500 it may not be easy at all to refinance your mortgage loan.
- Try conventional mortgage lenders first: Conventional mortgage lenders don’t find it safe to cooperate with borrowers with extremely low credit score. If your credit score is above the 650 mark, then you’ve a chance to get your application accepted. Having a credit score around 650 is actually very difficult after going through foreclosure. It’s obviously better to wait for at least 5 years after foreclosure if you’re eyeing conventional loans. Also the closing costs may be a little bit higher. So, before you decide to contact a conventional lender make sure to check all the details first.
- Take care of your credit: Foreclosure may not be a hurdle in the way of refinance when you’ve good credit score to present. The lender will judge your credibility first. As foreclosure reduces your credit score, it’s better to concentrate on improving your score before thinking about refinance. It’s extremely important to work on improving the credit score for overall benefits too. So, pay off your due bills on time, accumulate less debts and be a responsible consumer to improve credit score considerably.
How difficult is it to convince lenders?
Foreclosure stays there on your credit report for nearly 7 years. During that period it’ll be better for you not to refinance your mortgage loan. Wait for at least 3 to 5 years and repair your credit score first. After your credit score will improve, you won’t have to worry about convincing the lender. To improve your credit score within 3 to 4 years you’ll have to be very careful with your way of living. You’ve to be careful about paying off your due bills and other accounts in collection also. Lenders will also check your previous payment history. You need to be justified in all aspects. To be very precise, if you can prove your credibility, then convincing the lenders won’t be a tough job.
Lastly, before you decide to refinance, make sure that you’ll get reasonable terms. So, just improve your credit score and refinance to simplify your loan term.