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Hedy’s Hints: Getting back into the homeownership game after foreclosure

Two words: Fear not.

Just because you've gone through foreclosure, bankruptcy or have a poor credit history does not mean that you cannot buy a home. People in these situations buy homes everyday. You just need to be aware and knowledgeable of the additional hoops you will have to jump through to qualify.

When looking to buy a home, the real estate agent you choose to represent you makes a huge difference in the home buying process.

A loan by the name of FHA

An FHA loan is one of the most used loans in today's market. It is also a top contender for homebuyers who have faced foreclosure, bankruptcy and not-so-stellar credit. Today's FHA mortgage requirements for foreclosures and bankruptcies are:

• A foreclosure that was discharged three years ago

• A bankruptcy discharged two years ago

Homebuyers with foreclosures and bankruptcies on their records need to show a consistent history of pristine credit since the time of their foreclosure. Additional FHA requirements include:

• On-time bill payment on all credit accounts since the foreclosure/bankruptcy

• A 640 credit score (responsible credit use is absolutely essential to gain this score 3 years out of foreclosure)

• A verified down payment (3.5% or higher, depending on the borrower)

• Upfront and ongoing mortgage insurance (which protects the lender from debts in case the buyer defaults)

• Significantly lower debt-to-income ratios (ensures the buyer has ample discretionary income to make payments long-term)

An FHA loan may be just the thing that you need. With three years of good credit history and solid changes in your spending, you could find the homeownership door open again after foreclosure.

Ways to improve your credit

There are other ways to boost your loan application, including improving your credit score despite your foreclosure history. Here are some things you can do:

• Obtain a major credit card.

• Show steady employment on the job for one to two years.

• Earn a regular salary or wage (this does not apply to self-employment).

• Save a down payment of at least 10%.

• Avoid late payments and continue to pay your bills on time; do not fall behind.

Your re-introduction to the housing market in a new economy will allow you to re-establish a long-term credit track record and keep the housing market moving. The American dream can still be attainable!

Hedy Goldman has lots of knowledgeable information to share. She has been practicing real estate since 1996 and is a 2010 gold award winner at Windermere Real Estate SoCal. Hedy sells all over San Diego, but specializes in North County Coastal. She can be reached at (858) 504-2334 or San Diego Realtor.