Last Updated on Mar 11, 2020 by James W


Bouncing back after a credit or real estate disaster has its own set of challenges. But if you are determined to get your credit in check, there are ways to succeed. It can be an uphill battle; however, you’ll be happy to know that many people have been able to purchase homes after a bankruptcy,  foreclosure, short sale and a deed-in-lieu of foreclosure.

In all honesty, the economy has not been kind to a lot of people. And if you lost a job, or couldn’t work for other reasons, these circumstances may have caused you to fall behind on your mortgage and other credit payments. But even if you lost everything, this doesn’t mean that you have to settle into life as a renter.

You can own again, but you’ll need to plan now, and take steps to improve your financial stability.

1. Fix your credit score

If you’re not a financially savvy person, you might not know the right ways to fix your credit. There is no “one” way to improve a low credit score, rather it involves a combination of smart credit choices. It is best to discuss your options with some one like Doan Law who can help determine the best course of action for your needs. 

For example, you’ll need to pay your creditors on time every month. This adds positive activity to your credit report, which ultimately increases your score. Also, you should pay down credit card debt and any other loans in your name. The less debt you owe, the better your score.

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2. Save up enough cash

Nowadays, a conventional mortgage loan requires a 5% down payment. However, if you lost your home to foreclosure, or if you faced a short sale or bankruptcy, you’ll need additional cash to qualify for a mortgage loan. The exact amount you’ll need varies by lender. But typically, you might be able to get a conventional mortgage after two years with a 20% down payment; four years with a 10% down payment; and seven years with less than a 10% down payment.

  • – Saving this type of money requires sacrifice, but you can do it. Options include:
  • – Saving your tax refunds and work bonuses
  • – Selling a second car 
  • – Getting a roommate and splitting expenses
  • – Canceling unnecessary services, such as cable or a gym membership
  • – Working overtime or getting a part-time job to supplement your income

3. Research FHA mortgage loans

The rules for getting an FHA mortgage loan are different from a conventional loan. In fact, some lenders who offer these mortgage loans do not impose a waiting period after a short sale. This isn’t always the case; however, if your mortgage was current prior to a short sale, you might be able to qualify for a new home loan as soon as your financial situation improves. Naturally, the lender will carefully consider the circumstances leading up to the short sale before approving your application.

FHA mortgage loans are also worth considering because these only require a 3.5% down payment, and you can get a loan with a credit score as low as 620.

4. Proper documentation

Getting a mortgage is dependent on whether you keep accurate financial records. Most lenders will require tax returns from at least the past two years. If you’re self-employed, you’ll need to provide a year-to-date profit and loss statement for your business. And depending on the lender, they might ask for bank account statements to review your assets. This way, the lender can confirm that you have enough in reserves to pay your down payment and closing costs. Some lenders will even require that you maintain a 2- to 3-month cash reserve after you’ve paid mortgage-related costs.

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Getting another mortgage after a credit or real estate disaster isn’t a walk in the park, but it’s doable. Just know that it’ll take patience, a few sacrifices and a realistic plan.


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