Many homeowners seem to believe that they will have a very difficult time of buying a home after facing foreclosure or having to file bankruptcy, especially if the home went all the way through the process and was lost at a sheriff sale. However, this fear is, for the most part, unfounded, and even previous foreclosure victims should be able to qualify for a new mortgage within a few years of the experience. There is at least one little-discussed method of qualifying for a new mortgage that home buyers should be more aware of, especially if they have recently gone through bankruptcy or the process of losing a home to foreclosure.
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In fact, a significant number of banks are often willing to loan money to former homeowners even just a few months after they have lost their homes. As surprising as it sounds homeowners are able to get a mortgage for nearly any property they want. And even more surprisingly, this can be done even with horrible credit scarred by foreclosure or bankruptcy. No cosigner may be required, as well.
Of course, this kind of loan is not advertised very heavily, because the practices that are required to qualify for it are not common financial habits, whether of previous foreclosure victims or consumers in general. The secret is having a large enough down payment so that the bank will loan the applicants the rest of the money with almost no questions asked. The amount of the home buyers' investment in the property secures the loan to such an extent that the bank is not as worried about the credit risk So, hopefully homeowners who have lost their homes to foreclosure, or are working on repairing their credit and would like to invest in the real estate market in the future have been saving up quite a bit of money for their next house purchase.
Otherwise, with a small down payment, the bank will have to look more carefully at the overall credit rating to determine the probability of the loan applicants making enough payments so that there is enough equity that the lender will make a profit if they have to foreclose in the future. They would like to see the mortgage applicants invest a significant amount of money in the property they are purchasing; if this is not the case, they will want to see that the buyers have established good financial habits of borrowing manageable amounts and paying them back on time. If the former foreclosure victims' credit is not good, and they are unable to come up with any money to put down, then there is a strong possibility that they will not get the mortgage to purchase the house.
Offering a lot of extra cash in the form of a down payment will pretty much get rid of any objections the bank has about the home buyers' credit. Making the loan will be worthwhile to them even in the rare case of the homeowners never making a payment, since they can foreclose, take the equity, and sell the house for a profit on the market. Of course, this is not what lenders want to do at all, since they would prefer to make money on the interest collected; most banks have no desire to manage property and have to split profits with real estate agents, title companies, and attorneys. But a large down payment will ensure the potential of reclaiming any large losses on the loan due to default.
Besides saving up for a down payment, foreclosure victims and those just out of bankruptcy should also start immediately working on their credit after saving the home or having to move and make a fresh start. In either case, if they wish to qualify for better mortgage rates or purchase a home in the future, the two keys to success are having good credit and having money. But even if the home buyers are unable to repair their credit, many objections against lending them money will be overcome with a large amount of cash to put down on the purchase.
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