When Can You Buy a House Again After Foreclosure?
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By Bromwich+Smith Staff | 549 words | Reading Time: 2 minutes and 38 Seconds | Date: 2022/05/03
Unfortunately for some Canadians homes can be quite costly in terms of mortgage payments. Although it can be rare in Canada, foreclosures do occur for many homeowners. There can be a lot of causes for foreclosure, and the journey to being able to buy a home after a foreclosure can take time. However, it is possible to buy a house after foreclosure.
Mortgage lenders know that a foreclosure can impact your credit report, deeming you a risk for another mortgage. Don’t despair though, there is hope and we want to share with you some of the ways you can rebuild to buy another home.
Key steps in buying a home again.
What lenders are looking for:
- Great credit before the foreclosure
- Great credit since the foreclosure
- The foreclosure was caused by a one-time event
- You are now recovered or have made fundamental changes in your life
How can you rebuild your credit?
With a foreclosure, the biggest impact is to your credit rating regardless of the circumstances of the foreclosure. So a key element to being able to buy a home again is to rebuild your credit and improve your overall credit score. The waiting period to buy a home after foreclosure is really dependent on how quickly you improve your credit. Here are a few tips to help you.
1. Pay your bills on time
Paying your bills on-time and consistently, is a big portion of your credit history.
These are the considerations factored into the payment history portion of your credit score:
- How long your payments were late
- How recently you were late
- Your past-due balances
- The number of past-due accounts you have
Establishing and maintaining payments for your current bills will go a long way in building a healthier credit history and score.
2. Reduce any outstanding debt
Your debt income ratio (DTI): the percentage of before-tax income used to make monthly debt payments is a critical element that mortgage lenders review when approving you for a home loan.
If you can pay down your outstanding debt it will definitely increase your chances of getting approved for a mortgage. To assist you, when factoring your total DTI ratio, including your new mortgage payment and all monthly debts, it shouldn’t exceed 43%.
3. Save, save, save
You’ll need money for your down payment along with closing costs, plus other essentials; homeowners insurance, homeowners association fees, maintenance costs, property taxes and unexpected expenses, so building up savings will be vital.
We suggest giving yourself some breathing room by saving three to six months’ worth of your living expenses in an emergency fund, which you can use instead of taking on more debt. Avoid depleting your savings when you do buy a home again, so you have a financial cushion if you fall on hard times.
Buying a home regardless of a foreclosure is a big endeavour and does require planning and savings. We hope the suggestions we have shared help in letting you know it's possible.
Regardless, if you are feeling financial stress and don’t know where to start, we’re here to help. With Bromwich+Smith you are never alone and we ensure that our expertise will leave you feeling hopeful and confident. Call our Licensed Insolvency Trustees today for a free, no obligation, confidential consultation 1-855-884-9243. Let’s see you flourish!