Aside from being a terrible event in your life, having your properties foreclosed present a very big problem when it comes to your credit score.
With a bad credit history, you may find it hard to get other types of loans especially mortgage loans. This is primarily because a low credit score indicates that you are less creditworthy and you are not capable of paying your loan. However, you should not lose hope.
These days, there are some ways to prevent a foreclosure and there are also some things that you can do in order to get mortgage loans after a foreclosure.
Preventing a Foreclosure
The best way to prevent a foreclosure is to pay your loan on time. However, there are many unforeseen events in our lives that may prevent us from paying on time. As a result, one can try another way of preventing a foreclosure- choosing the right mortgage loan package.
There are many lending companies that offer mortgage loans, either online, or in your local area. The variety of choices for mortgage loan packages can be confusing.
However, when choosing which mortgage loan to get, you have to make sure that it includes a forbearance agreement. This allows you to stop making payments for your debt at a specific time frame, provided that you have valid reasons. With this agreement, you will be able to skip your payments and then pay them later after you have dealt with your financial crisis.
What to do when you get a foreclosure?
If you get a foreclosure, it generally means that your mortgage loan agreement doesn’t have a forbearance agreement and you haven’t paid your mortgage bill for more than three months. When this happens, don’t be so pessimistic. You can still get good mortgage loans. You just have to take three easy steps:
Re-establish your credit
A credit history with a foreclosure is a no-no for most mortgage lenders. But, if you can build a good credit track record after the foreclosure, potential mortgage lenders will recognize your improvement. You can do this by opening new credit accounts and then making sure that you are able to pay your bills on time, if not in advance. Try to get credit cards with lower interest rates as well. Make sure that your new credit record will make your potential lenders realize that you are still dependable and creditworthy.
Be more patient
After you have experienced a foreclosure, don’t avail of a mortgage loan immediately. There are many lending companies that will offer you bad credit mortgage loans. However, you should only avail of such if you really badly need a mortgage loan as soon as possible. If you can, do wait. Note that the more you wait before plunging into a mortgage loan, the lower interest rates will be offered to you. As you wait, work on reversing your negative credit image.
If you can’t wait for a year or so after you have had a foreclosure and you plan to get a mortgage loan right away, then you ought to be choosier when picking your lender. Note that your only options are sub prime and high risk lenders. They offer higher interest rates for a mortgage loan- two or three points higher than the normal rate. Thus, you ought to shop around first before you get a mortgage loan.