Can I Get a Mortgage Loan After a Foreclosure Process?

Can I get another mortgage loan after going through a foreclosure process? Unfortunately, this is going to be a fairly common question in American, for years to come. We saw record-breaking numbers of foreclosures from 2008 - 2009, and 2010 is shaping up to be another bad year for the housing industry. So let’s examine this question in more detail:

First, the good news. Yes, it’s possible to get a mortgage loan after a foreclosure on your last home. Plenty of people have done it, and so can you. But it may take time for your credit score to recover from the damage inflicted by this process. That’s the biggest variable in all of this — the “how long” side of things.

Fortunately, there’s plenty you can do to rebuild your credit after going through a foreclosure process. And that’s the first step to getting another mortgage loan down the road.

How Foreclosure Affects Your Credit

Here are some things to keep in mind about your credit, and how it’s affected by a foreclosure filing:

• When a lender forecloses on you for failure to pay, you can be sure they’ll report it to the three credit-reporting bureaus. These are Experian, Equifax and TransUnion. This is the primary way a foreclosure can “haunt” you later on.
• By law, a foreclosure can only stay on your credit report for a period of up to seven years. But the impact will lessen over time. In other words, you can improve your credit score in the years after the foreclosure, up until the seven-year mark when it gets removed from your report.
• Your FICO credit score is one of the key factors considered by mortgage lenders, and it’s based on the information found within your credit reports. After foreclosure, your score will certainly take a hit. I can’t tell you how much it will decrease, but you can be sure that it will. That’s the initial damage. After that happens, you need to focus on increasing your score steadily over time.
• You can get a mortgage loan after foreclosure if you do the following things: (A) increase your FICO score to a level that’s acceptable by one or more lenders; (B) pay down your debts until they equal less than 30% of your gross monthly income; and (C) save up for a 20-percent down payment on your next loan.
• If you do the three things listed above, there’s a very good chance you’ll be able to get another mortgage loan within the next few years.

Related Reading - If you’ve already been foreclosed upon, and you’re looking for ways to rebuild your credit, check out the helpful articles below:

How to Rebuild Your Credit After Bankruptcy (similar scenario)
How to Qualify for a Mortgage Loan in 2010

I hope this takes some of the mystery out of the process. You probably won’t be able to get a home loan right after the foreclosure process. But if you follow the advice outlined in this article, the day will come eventually.