Q: My husband and I filed for bankruptcy and had our home foreclosed upon a little over a year ago.
We want to own another home some day and have been trying to straighten up our credit by making an effort to pay our bills on time.
How long do you think it will take us to or would it be even possible for us to obtain another mortgage, with a foreclosure in the past? If we have a good down payment would that be beneficial for us? If you could please send me your advice, we would really appreciate it.
A: The question you need to ask really isn’t whether you can qualify for a mortgage. You can get a mortgage today.
The question is how much do you want to pay for your next home loan?
Lenders today rarely say no to anyone who applies for a mortgage – even those with bankruptcy or foreclosure in their past. But they adjust upward the interest rate and fees you’ll pay for getting that new loan. If someone with great credit pays 6.25 percent for a 30-year fixed rate loan with zero points, you might pay 8.25 percent with 2 points.
The not-so-good news is that while you’ve been paying your bills on time for a year, it’ll really take 2 to 4 years of on-time payments to qualify for those better, lower, interest rates.
But if you get a mortgage now with a legitimate lender, it may help you improve your credit history and score more rapidly. Ask the lender if it reports your on-time payments. The reporting of those on-time payments will help burnish your credit score.
You should check your credit history and score regularly. I suggest you use www.annualcreditreport.com. The credit history is free, and you’ll pay around $7 for a copy of your credit score. You’re allowed one free credit report from each of the three credit reporting bureaus each year and this is the site to use.
If you’ve already received your three free credit histories, you can always go to www.myfico.com.
Nov. 22, 2006.
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