How to Get a Mortgage After Foreclosure (Yes, It’s Possible)

If you’ve been through a foreclosure, you’ve crawled through one of the worst real estate ordeals there is. But that experience doesn’t mean homeownership has to remain forever out of reach afterward.

In fact, it’s much easier to qualify for a mortgage after a major credit event than you may think. It all depends on the circumstances of your foreclosure—and how you’ve managed your credit since.

So if you want to get back out there, here’s how to get a mortgage after foreclosure.

How long after foreclosure can I apply for a loan?

When it comes to the necessary waiting period between going through a foreclosure and applying for a new loan, every mortgage program is a bit different. But there are some general rules.

“For a conventional mortgage, a borrower who experienced foreclosure is required to wait seven years,” says Ray Rodriguez, regional sales manager at TD Bank.

On the other hand, the Federal Housing Administration and the U.S. Department of Agriculture require a three-year waiting period while the U.S. Department of Veterans Affairs requires a two-year wait.

How to speed up the process

You can reduce the waiting period for landing a new mortgage by showing that the foreclosure was the result of a significant financial hardship from which you have recovered.

So what’s considered significant? “I live to shop” definitely doesn’t count; legitimate reasons include a layoff, business failure, divorce, or major health problems.

Be prepared to provide documentation of the hardship you claim, such as proof of paid medical bills.

“You’ll need to provide an explanation letter, which should be short and focus on recovery from the event, rather than excuses for it,” says Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage.”

Her sample sentence: “After my business failed, I landed a W-2 job with an excellent company doing the same thing I did before, but with a guaranteed salary and full benefits package.”

Just keep in mind that “there is no one-size-fits-all when it comes to lenders dealing with this situation,” says Rodriguez. Every lender has different requirements aside from basic guidelines set down by the FHA, VA, USDA, Fannie Mae, and Freddie Mac.

The FHA, for instance, is particular about what constitutes a significant financial hardship, says Fleming. A serious illness or the death of a wage earner may be acceptable, whereas divorce may not be. (You might have been able to work through a divorce, but not through illness or a death.)

How to rebuild your credit

For a potential borrower, a major component of landing a new mortgage is demonstrating that you have bounced back from the financial hardship that caused you to default in the past. Job one of proving that is rebuilding your credit and keeping it sparkling clean.

To boost your credit score—lenders typically like to see a score of at least 580—pay bills on time and maintain low balances on credit cards.

“Consumers should also frequently check their credit reports to ensure there are no inaccuracies that could negatively affect their chances of qualifying for a loan,” say Rodriguez.

Keep a paperwork file

Be prepared to document everything finance-related in your postforeclosure life, advises Rodriguez. That includes pay stubs, bank and brokerage statements, and tax returns. Lenders will ask for this paperwork to verify everything you put on your mortgage application as a precaution to avoid another potential foreclosure.

And save your pennies! Unless you’re using VA financing, you will probably need a larger down payment to secure a mortgage than you may have put down last time.

“Figure 10% minimum,” says Fleming. There may be exceptions, but they are rare.

What about nonprime lenders?

You can land a new loan immediately after completion of the foreclosure in most cases. But beware: It’s expensive, the fees and interest rate are higher, and usually the terms aren’t great, Fleming says. For instance, rather than a 30-year fixed loan, you may be offered only an adjustable-rate mortgage with a high margin.

How a mortgage adviser can help

Meet with an experienced mortgage adviser soon after your foreclosure so that you can begin to work on any other long-term issues that need to be addressed and fixed.

“The three legs of the qualifying stool are income, credit, and assets,” says Fleming. If one or two are weak, you’ll pay more for a loan or may not qualify. The best corrective action for a prospective home buyer depends on what leg is weakest.

Once you’ve worked on getting your credit score over a particular threshold, you may need to conserve cash if your liquid reserves are too low, or pay down your credit cards if your debt-to-income ratio is too high.

Bottom line: Your past does not predict your future when it comes to financing—in fact, a bad experience can often scare people straight.

“Many folks have rough times in their financial life, and then are excellent credit risks afterward,” says Fleming. “If you can demonstrate a willingness and ability to make payments in the future, you can get a loan to buy a home.”

Margaret Heidenry is a writer living in Brooklyn, NY. Her work has appeared in The New York Times Magazine, Vanity Fair, and Boston Magazine.

Yale’s Shiller take on the Current and Future Housing Market

June 1, 2016: The S&P/Case-Shiller Home Price Index rose 5.2% year-over-year in March. Yale University economics professor and Robert Shiller, one of the index’s creators, had a positive yet tempered reaction to the data.

“It’s kind of what I expected. Ever since 2012, that was the bottom of the market, it’s been chugging along, going up. And it’s not exciting, but it’s positive and I don’t see why it won’t continue it for a while,” Shiller told the FOX Business Network’s Connell McShane.

“Well I don’t think it’s a preoccupation the way it was in 2006-2007. Though people need a place to live, employment is growing, people bid up the price, you have to outbid somebody else to get the house. I don’t think people are so focused on the excitement of a bubble,” said Shiller, explaining his subdued reaction.

On concerns the factors in the housing market that led to the financial crisis have not been fixed, Shiller responded, “We can’t fix human psychology.”

Shiller weighed in on whether the safeguards that have been put in place are sufficient to prevent another financial crisis in the future.

“There has been a lot of regulation” Shiller continued, “All over the world countries are putting in protections. So, yeah, I suppose things are better. But I don’t know that the protections are going to be enough and someday if this keeps going on long enough we might have another collapse in the housing market.”

When pressed on when another housing market collapse might occur, Shiller replied, “Nobody knows. If anyone knew that it wouldn’t happen. There’s an element of truth to efficient markets. On the other hand, yeah there are places where it’s getting exciting.”

Credit score problems still haunt Americans.

WASHINGTON, D.C. – May 25, 2016 – The Consumer Financial Protection Bureau (CFPB) highlighted credit score problems faced by Americans in its monthly consumer complaint snapshot. According to the report, consumers continue to complain about incorrect information on their credit reports, as well as difficulty having errors resolved.

“Credit reports are the foundation of consumers’ financial lives,” says CFPB Director Richard Cordray. “Consumers continue to express their frustration about inaccurate information on their credit reports and difficulty in getting these errors fixed. We will continue to work to ensure that credit report disputes are investigated, errors are fixed and consumers are treated fairly.”

Consumer reporting companies track a person’s credit history and other information. Errors in a consumer’s file can affect everything from their eligibility to take out a mortgage to whether they’re eligible for a job. Since the CFPB began accepting credit-reporting complaints in October 2012, the Bureau has handled approximately 143,700 of them.

Credit score complaint topics

Incorrect information on credit reports: 77% of credit reporting complaints submitted to the CFPB relate to incorrect information appearing on their reports. Frequently, these complaints are about a debt collection item that has been paid but appears as an unpaid debt on the report, a debt that is not recognized by the consumer or a debt that is no longer due because it passed the point of being enforceable in court.
Difficulty disputing inaccuracies: Consumers consistently report difficulties disputing inaccuracies on their credit report, including long delays trying to speak to a representative at the consumer-reporting company that created the report or the company that furnished the information. Other consumers complained about negative customer service experiences when they were able to get through.
High-volume complaint companies: Out of all credit-reporting complaints submitted to CFPB between December 2015 and February 2016, 95 percent involved the three nationwide credit reporting companies – Equifax, Experian and Transunion, though some of the complaints focused more on the information other companies furnished to the top three credit reporting companies.
Specialty consumer reporting companies: Consumers also submitted more than 2,000 complaints regarding specialty consumer reporting companies that specialize in background and employment screening, checking account screening, rental screening and insurance screening.
CFPB says that consumer-reporting companies have been a major focus, and it has published tips and guidance for consumers who want to review their credit report and improve their score.

© 2016 Florida Realtors®

Homebuilders say major uptick coming.

May 6, 2016 – Steady job growth, low mortgage rates and pent-up demand are prompting an increase in the demand for new single-family homes, and homebuilders say they’re ready to build them.

However, builders also say they face plenty of headwinds that could subdue some construction, such as a shortage of lots and labor, and tight access to construction and development loans.

“Builders remain cautiously optimistic about market conditions,” says Robert Dietz, chief economist of the National Association of Home Builders, in a Spring Construction Forecast Webinar on Thursday. “2016 should be the first year since the Great Recession in which the growth rate for single-family production exceeds that of multifamily. And we see single-family growth accelerating in 2017 as the supply side chain mends and we can expand production.”

NAHB forecasters predict that single-family production will see a 14 percent uptick this year to 812,000 units, and then rise another 19 percent to 964,000 units in 2017.

Single-family starts will reach 64 percent of historically normal levels by the fourth quarter of this year and rise to 77 percent of normal by the end of 2017, NAHB reports. By the end of 2017, the top 20 percent of the largest states will reach at least 102 percent of normal single-family production levels compared to the bottom 20 percent, which likely will still remain below 65 percent, NAHB reports.

“Consumer surveys suggest the ultimate goal of millennials is to purchase a single-family home in the suburbs,” says Dietz. “We see growth for single-family looking ahead. The recovery continues and is dictated by demand side conditions and supply side headwinds.”

Source: National Association of Home Builders

Florida foreclosures down 38% in one year

April 12, 2016 – February 2016 National Foreclosure Report finds a 37.6 percent drop in Florida’s foreclosure inventory in just one year. Of 21 U.S. states that foreclose through the court system, the Fla. inventory decline outpaced second-place New Jersey’s by 12 percent.

Nationally, the foreclosure inventory declined by 23.9 percent when counting both judicial and non-judicial states, and completed foreclosures dropped 10 percent year-to-year.

The number of completed Florida disclosures dropped 36.6 percent year-to-year. Nationally, the decline was 19 percent. The foreclosure inventory represents the number of homes at some stage of the foreclosure process and completed foreclosures reflect the total number of homes lost to foreclosure.

As of February 2016, the national foreclosure inventory included approximately 1.1 percent of all homes with a mortgage – the lowest for any month since November 2007.

CoreLogic also reports on the number of mortgages in serious delinquency, defined as 90 days or more past due including loans in foreclosure or REO. In Florida, 5.1 percent of mortgaged homes are considered seriously delinquent, a 34.2 percent decline from one year earlier. Nationally, the number of seriously delinquent homeowners declined 19.9 percent year-to-year to hit its lowest level in eight years.

“Job creation averaged 207,000 during the first two months of 2016, and incomes grew over the past year,” says Dr. Frank Nothaft, chief economist for CoreLogic. “More income and improved household finances have helped bring serious delinquency rates down in nearly every state.” However, two energy-dependent states – North Dakota and West Virginia – have seen a price drop as a result of price declines.

“Home price gains have clearly been a driving force in building positive equity for homeowners,” says Anand Nallathambi, president and CEO of CoreLogic. “Longer term, we anticipate a better balance of supply with demand in many markets which will help sustain healthy and affordable home values into the future.”

Fla.’s Canadian homebuyers becoming big sellers

Feb. 25, 2016 – Escaping from the chilly north, Canadians always have been eager buyers of Southwest Florida vacation and retirement homes.

But now a lower loonie compared with the U.S. dollar is causing a reverse flow, heating up the sale of Canadian-owned homes in the United States, Canadian real estate agent Laura Leyser told a group of about 100 real estate agents and brokers Thursday evening at the Miromar Design Center in Estero.

With the exchange rate currently at about 73 cents for every U.S. dollar, some Canadians are deciding that a favorable exchange rate, coupled with rapidly rising home prices, are a good enough reason to give up their sunny Southwest Florida hideaways.

“Canadians see this time as an opportunity to sell,” said Leyser, who is past president of both the Canadian and Ontario real estate associations.

If Canadians start to sell in droves – perhaps also influenced by the volatility of the stock market and the future direction of home prices – it’s likely Southwest Florida’s real estate market will feel it.

Canadians make up the biggest proportion of international buyers in the Southwest Florida market, according to the Naples Area Board of Realtors. About seven out of 10 international buyers in Collier County are Canadians, NABOR said.

Leyser said Canadians traditionally have been attracted not only by the good weather but also by their perception that real estate in the region is a good investment with low property and sales taxes.

Lux amenities also are an attraction, since gated golf course communities with pools, clubhouses and tennis courts aren’t as common in Canadian cities, she said.

With average Canadian home prices up 17 percent in January from a year earlier, to $470,297, some Canadians also see Southwest Florida home prices as a bargain.

Yet while Canadians remain heavy buyers of Florida real estate – 41 percent of their purchases are in the Sunshine State – their investment is on the decline, partly due to a strengthening dollar that made U.S. homes more expensive for them, according a report by the National Association of Realtors. Nationwide, Canadian buyers were responsible for $11.2 billion in residential purchases in 2015, down from $13.8 billion in 2014, NAR reported.

Canadian buyers made up 14 percent of all international property buyers in the U.S. in 2015, NAR said.

While the volatility of the American stock market and concerns about the future direction of home prices may also put a damper on Canadian purchases in the near future, at least one perpetual worry of the real estate community is unlikely to have any effect: a future upward spike in mortgage interest rates.

Canadians can get a mortgage on a U.S. property from a Canadian bank at a lower rate than Americans can get from U.S. banks, Leyser said.

But interest rates aren’t much of an issue for Canadians anyway, since seven out of 10 buyers purchase with cash.

Copyright © 2016 the Naples Daily News (Naples, Fla.), June Fletcher. Distributed by Tribune Content Agency, LLC.

Lending disclosures delay 1 in 10 transactions

WASHINGTON – Feb. 15, 2016 – A new survey of Realtors conducted by the National Association of Realtors® (NAR) attempted to find out exactly how well the TRID rules are, and are not, working. According to Realtors, the new disclosures led to few contract cancellations – but they’ve caused a delay in about one in 10 transactions.

NAR’s TRID survey highlights

10.4% of transactions were delayed
Less than 1% of transactions were canceled
The typical transaction delay due to the new disclosures is 8.8 days
54.5% of respondents had problems getting closing documents for transactions and half found errors once they did
Realtors were less likely to have access to closing documents in delayed settlements
Most frequent closing disclosure problems: Missing concessions, incorrect names or addresses. However, Realtors also cited problems with incorrect fees, commissions and taxes
E-settlement procedures had fewer errors and faster remediation

A complete overview of survey results can be found on NAR’s website.

© 2016 Florida Realtors®

Citizens Ins. recovers $4.2M in claim payouts

TALLAHASSEE, Fla. – Feb. 5, 2016 – Citizens Property Insurance Corporation – operated by Florida as the state’s insurer of last resort – reports that it recovered more than $4.2 million in customer premiums in 2015 by aggressively pursuing third parties responsible for losses and salvaging property involved in a claim.

According to Citizens, its recovery team of adjusters identified and recovered payments made by Citizens that it later found to be caused by, or contributed to, by other parties. Included in that figure is more than $440,000 in deductible payments returned to 391 policyholders.

“Such recoveries are part of an overall effort by Citizens to ensure that our policyholders are protected and their premiums kept as low as possible,” says Chris Gardner, Chairman of Citizens Board of Governors. “I applaud the team’s success.”

In 2015, Citizens recovered almost $4 million through the process. Additionally, Citizens recovered $186,344 in legal fees and another $35,000 by salvaging appliances and other items following a claim. The recovery team had a 2015 goal for that it says it surpassed: $2.7 million.

Examples of Citizens recovery efforts in 2015:

$210,000 from a contractor that caused an explosion using a homemade recipe to remove rust stains from terrazzo flooring
$125,000 from a condo owner’s insurance company because the owner didn’t turn off the water during an extended absence as required by the condo association
$65,000 from an air conditioning company that caused fire and smoke damage during a routine maintenance visit
Citizens’ recovery unit was established in 2009. Its eight employees are charged with reviewing claim losses that appear to be the fault of someone other than Citizens’ policyholder. Other parties include manufacturers of defective products, improper installation and other responsible parties that were negligent.

© 2016 Florida Realtors®

Fewer Fla. foreclosure homes ‘seriously underwater’

IRVINE, Calif. – Jan. 28, 2016 – RealtyTrac’s Year-End 2015 U.S. Home Equity & Underwater Report finds a drop in the number of Florida homes that are “seriously underwater” – ones that owe at least 25 percent more on mortgages than the current value of their home.

At the end of 2015, one in five mortgage homes (19.8 percent) in the state were seriously underwater. One year earlier, it was one in four (24.7 percent). A significant part of that drop occurred in in the last quarter of the year: In the third quarter, 23.2 percent of Florida homes with a mortgage were seriously underwater.

On the flipside, more Florida homeowners became “equity rich” in 2015 – homes with at least 50 percent equity. The year ended with 20.7 percent of homes equity rich; a year earlier, it was 17.5 percent.

In a look at metro areas, two Florida cities ranked in the top five for their share of seriously underwater properties. Lakeland ranked second (24.4 percent of all mortgage homes seriously underwater) after Las Vegas; Orlando ranked fifth with 22.2 percent.

Two Florida cities also make RealtyTrac’s top-five list specific to foreclosure properties that are seriously underwater. Lakeland ranks third (46.1 percent) after Las Vegas and Chicago, and Deltona-Daytona Beach-Ormond Beach ranks fifth (44.9 percent) after No. 4 Cleveland.

“The equity in South Florida homeownership continues to grow with our rising prices,” says Mike Pappas, CEO and president of Keyes Company in the South Florida market. “Distressed homeowners who are underwater still have options – working through a short sale – usually receiving some cash for moving or utilizing the advantageous HARP refinancing vehicle. ”

National foreclosure numbers

Nationwide, one in 10 of homes with a mortgage (11.5 percent) was seriously underwater at the end of 2015. That number is a drop from 12.7 percent at the end of the third quarter and 12.7 percent year-to-year.

“Over the past three and a half years, the number of seriously underwater properties has been cut in half,” says Daren Blomquist, vice president at RealtyTrac. “But we continue to deal with a long tail of seriously underwater properties, and it will likely be another five years at least before most of those remaining underwater properties move into positive equity territory.”

At the end of 2015, one in four U.S. homes with a mortgage was equity rich (at least 50 percent equity) – 22.5 percent of all properties with a mortgage. The number of equity rich properties at the end of 2015 was 19.2 percent of all properties with a mortgage compared and 20.3 percent at the end of 2014.

In a look at only homes in foreclosure at the end of 2015, 49.7 percent had some equity – the highest percentage since RealtyTrac began compiling the data in 2013. The percentage is an increase from 43.3 percent in the third quarter of 2015 and 34.6 percent year-to-year.

© 2016 Florida Realtors®