Home ownership after foreclosure

As Minnesota residents may know, the recession saw many homeowners lose their properties to foreclosure. As time passes, the foreclosure is removed from an individual's credit report, allowing them to seek out a new home. Getting a mortgage following foreclosure may not be easy, but some loan programs focus on helping borrowers do that.

At least 5 million homeowners lost their homes since 2007. Between 2007 and 2008, 1 million of them went through the foreclosure process. Since delinquencies on a credit report usually drop off after seven years, 25 percent of foreclosed homeowners have seen the foreclosures taken off their credit reports. An additional 600,000 are expected to see foreclosures removed in 2015.

Some large banks were penalized over their mortgage policies and are hesitant to loosen credit for mortgages as the economy improves. This keeps former homeowners with a foreclosure away from home ownership. However, some smaller banks are using FHA and other loans to help individuals with less than perfect credit obtain a mortgage. An alternate type of home loan is helping potential homeowners obtain approval for a mortgage. This non-QM type of loan does require income documentation, and a down payment of around 20 percent is needed by most lending programs.

As time passes from the housing market's problems, it is expected that restrictions to getting a mortgage may be relaxed. A number of banks are seeing mortgages by new homeowners who experienced the foreclosure in the past, and the numbers are expected to grow. It is estimated that about 7.3 million people who are in this situation may seek home ownership again in coming years.

The possibility of losing their home can be frightening to those who are struggling with mortgage obligations. A bankruptcy law attorney can explain how filing for Chapter 7 or Chapter 13 can often put a temporary stop to the foreclosure process.

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