Category Archives: Mortgage Tips and Tricks

Are Mortgage Discount Points Worth the Cost?


Most borrowers want the lowest possible mortgage interest rate. This is why they work to improve their credit scores before applying for a home loan and comparison shop. But these aren’t the only ways to find the most favorable rate – borrowers can also reduce their mortgage rate by paying discount points.

Discount points are optional, but offer a practical way to reduce the interest rate on a home loan. A cheap rate lowers the amount of interest paid over the life of a home loan, plus borrowers can enjoy a lower monthly payment. Although discount points are helpful, buying points isn’t the right choice for everyone.

Each borrower has to count the cost and then decide whether discount points makes sense for their situation.

What is a Discount Point and How Does It Work?

A discount point is a type of upfront prepaid interest paid to a mortgage lender in exchange for a lower mortgage rate.

For every discount point you buy, you receive (on average) .25% on your interest rate. If you apply for a home loan and the lender quotes a rate of 4%, paying two discount points can reduce your interest rate to 3.50%.

Paying discount points is attractive, especially if you need a lower interest rate and a lower monthly payment. But discount points aren’t cheap – and certainly aren’t free. Each discount point costs 1% of the loan balance, and this fee is included in your closing costs. Let’s say you’re financing $200,000 for a home purchase and you want to buy two discount points. In this scenario, you’ll pay $4,000 upfront.

Some lenders wrap closing costs into the mortgage loan, which means you don’t have to pay out-of-pocket for discount points. But even if you’re not shelling out money at the closing table, you have to do the math to determine whether discount points make sense from a financial standpoint.

To decide whether you should or shouldn’t purchase discount points, there are three factors to take into consideration: how much you’ll save monthly with a lower interest rate, how much you’ll pay for each discount point, and how long you plan to live in the home.

If you’re borrowing $200,000 and you buy two discount points to reduce your interest rate from 4% to 3.50%, you’ll pay an extra $4,000 in closing costs. If you have a 30-year fixed-rate mortgage, the difference in your mortgage payment at 4% and 3.50% is approximately $55 a month.

For discount points to make sense, you’ll have to live in the house long enough to break even or recoup the cost of buying the discount points. Since a cheaper interest rate saves $55 a month and you paid $4,000 for two discount points, you’ll have to live in the home for a minimum of 72 months (or six years) to justify the extra expense.

It’s difficult to predict where you’ll live in the next few years. As a rule of thumb, if you don’t foresee living in the property long-term, it might be cost-effective to skip discount points. On the other hand, if you know you’ll live in the home long-term, paying discount points can result in significant savings over the life of the loan.

Everything You Need to Know About 5/1 Adjustable Rate Mortgages


Some home buyers choose a fixed-rate mortgage in order to make regular, steady payments. But this isn’t the only option. You can also choose an adjustable rate mortgage (ARM), which features a fixed interest rate for a set number of years, followed by an interest rate that changes year-to-year based on the market. There are several options for an adjustable rate mortgage, with the 5/1 ARM being one of the most popular.

This type of mortgage has a fixed interest rate for the first five years of the mortgage term. Every year thereafter, the interest rate resets. With each adjustment, your rate may decrease, increase, or remain the same. Fluctuating rates can have a tremendous impact on monthly payments, so this option may not be right for everyone.

Here’s what you need to know before agreeing to a 5/1 adjustable rate mortgage.

  1. Who can benefit from a 5/1 ARM?

Some people avoid adjustable rate mortgages because these loans are riskier than other lending options. However, an adjustable rate can be beneficial in certain situations.

An interesting feature of ARMs is that the interest rate during the fixed-rate period is typically lower than the interest rate on a 30-year fixed-rate mortgage. With that said, a 5/1 ARM might be an option if you need to keep your mortgage payments as low as possible, at least within the first five years of getting the loan. This can benefit first-time home buyers who want to lower their expenses. In addition, a lower interest rate helps borrowers get more house for their money, while keeping payments within an ideal range.

But a lower interest rate isn’t the only reason to choose a 5/1 ARM. These mortgages are more suitable for buyers who will live in their homes for five years or less. This could apply to home buyers in the military who know their family will move within the next few years. These buyers can purchase a home, enjoy a lower rate for the next five years, and then move before their rate resets.

Additionally, a 5/1 ARM might work if you expect your income to increase in the future. One benefit of an adjustable rate mortgage is that these loans feature rate caps, which limit how much the interest rate can increase from year to year, as well as how much the rate can increase over the life of the loan. If you run the numbers, understand the worst-case scenario, and feel you can swing higher possible payments in the future, a 5/1 ARM isn’t as scary or risky. On the other hand, if you doubt your ability to manage potentially higher mortgage payments in the future, you’re probably better off with a fixed rate.

  1. Who won’t benefit from a 5/1 ARM?

Some people who don’t foresee relocating or receiving an income increase within the next five years may also select a 5/1 ARM. This is a gamble. In their minds, they can enjoy a lower interest rate today, and then refinance to a fixed-rate mortgage in five years before their rate resets.

This plan makes sense in theory. But there are no guarantees that they’ll be able to refinance from a 5/1 ARM to a fixed-rate. Refinancing a mortgage requires applying for a new home loan and re-qualifying. The lender will verify income and credit, and if a borrower’s income decreases after getting the original mortgage, or if his credit score drops, this affects qualifying for a refinance and getting a favorable interest rate.

If a borrower is unable to refinance and can’t afford their new payment after a rate adjustment, there’s the risk of payment problems, which can damage his or her credit score. There’s also the risk of losing property and equity.

So, if you’re in the market for a home loan, be sure to review all your options. Know your risks and talk to a financial planner if necessary – you never know how much you might actually save.


See our official Top 5 List of Mortgage Lenders to lock in your low mortgage rate today.


What You Should Know About First-Time Homebuyer Loans


There’s a plethora of mortgage options available to homebuyers, such as FHA loans, conventional loans, VA loans and USDA loans. But even if you qualify for a particular program, you might have difficulty saving up enough cash for a down payment and closing costs. Fortunately, some programs make it easier for first-time homebuyers to qualify for a mortgage and complete a home purchase.

First-time homebuyer loans are unique and typically feature lower down payments or grant money to assist buyers with mortgage-related expenses. Additionally, some programs have subsidized interest rates which can help first-time buyers qualify for the lowest rate possible and enjoy a cheap mortgage payment. These loans have helped millions of families, but there are a few things you should know about first-time homebuyer loans.

1. You can qualify even if you’re not a first-time homebuyer

When you think about first-time homebuyer loans, you might assume these loans are only available to borrowers who have never purchased a property. The interesting thing about these particular loans is that you can qualify even if you’re technically “not” a first-time homebuyer.

Some programs are open to buyers who have owned a home in the past, but these individuals can’t have owned in at least the past three to four years. So if you’ve previously sold a home and have been renting for at least three years, you might be eligible for this program.

2. Possible financial restrictions

Even if you meet the qualifications for a first-time homebuyer loan, eligibility is often limited to income. In most cases, these loans are only available to people who have low to moderate income. The goal is to help these borrowers realize their dream of homeownership. Usually, your income must be a percentage less than the median income for the area. This percentage varies depending on the program. You could also be disqualified for these types of loans if you have substantial assets, such as a sizable savings account or investment accounts.

3. Limits how much you can borrow

Since first-time homebuyer loans are designed to help low to moderate income families purchase a property, some programs limit the dollar amount a borrower can spend on a property. This price limit depends on where you live and the average cost of homes in your area. A price restriction is beneficial because it can keep your monthly payment within an affordable range. However, restrictions can make it harder to purchase the property you want.

4. The property must be owner-occupied

Purchasing a home as an investment property is an excellent way to diversify your portfolio and generate extra income. Some people purchase homes they can fix up and flip for a profit, whereas others purchase homes to use as rental properties. Unfortunately, if you’re considering applying for a first-time homebuyer mortgage, you won’t be eligible for the loan if you plan on using the home as an investment property. Most first-time homebuyer loan programs only finance owner-occupied properties.

Keys to Avoid a Mortgage Nightmare


Buying a home can be one of the most exciting times in your life. But it can also be a difficult, nail-biting process. Finding a home, getting a mortgage and closing the deal is unpredictable and rarely smooth sailing, and many buyers have their own horror stories. Despite what you might have heard about buying a home, there are ways to avoid your own mortgage nightmare.

  1. Skip the pre-qualification and get pre-approved

There is a difference between a mortgage pre-approval and a mortgage pre-qualification. Some homebuyers assume these are the same processes. So when they receive a pre-qualification from a lender, they think the loan is written in stone and they begin looking at properties in their price range.

A pre-qualification, however, is only a rough estimate of how much the bank “might” lend based on information provided on a mortgage form. At this stage in the process, you haven’t submitted any official documentation, such as tax returns or bank statements. The truth is, a pre-qualification doesn’t get you the keys to a new house. For a better idea of whether you meet the qualifications for a mortgage loan, you have to get pre-approved.

This involves submitting supporting documentation to the mortgage lender. The lender will also examine your credit report and your entire file goes through underwriting. If you qualify, you’ll receive a pre-approval letter with information on the maximum you can spend on a property as well as other terms, such as the type of mortgage, your interest rate and the amount you’ll need as down payment.

If you make an offer on a house based on your pre-qualified amount—which is only an estimate of what you can borrow—you might be disappointed to learn that you actually qualify for much less once the lender checks your income statements and credit report.

  1. Don’t get caught in a bidding

Property bidding wars can escalate quickly. If you’re not careful, you could end up spending more on a house than originally planned. Bidding wars occur when a property has multiple buyers competing against each other. These types of situations drive up the asking price of a property, and some buyers spend more than they can comfortably afford. If you win a bidding war and agree to pay more, there’s also the risk of the home not appraising at the final sale price. If the appraisal comes in low, you’ll have to renegotiate with the seller, or pay the difference between the appraisal price and the sale price out-of-pocket.

  1. Don’t open new credit accounts

One of the fastest ways to mess up a mortgage is opening new credit accounts after you’ve been pre-approved. Remember, your pre-approval is based on your income and debt-to-income ratio at the time of submitting your application. If you open a new credit card or get a new auto loan before closing, this changes your debt-to-income ratio.

Mortgage lenders have strict guidelines regarding debt limits, and if your minimum debt payments—including the future mortgage payment—increase to more than 36% of your gross income, this can cause your mortgage to fall through because the bank may conclude that you no longer qualify for the original loan amount.

  1. Don’t assume your income will increase in the future

When comparing mortgage options, you can decide between a fixed-rate mortgage and an adjustable-rate mortgage. Adjustable-rate mortgages have an interest rate that change on a year-to-year basis after an initial fixed-rate period, typically three to seven years. These mortgages are riskier, but also attractive because they usually start with a lower mortgage rate than fixed-rate mortgages.

Borrowers often choose an adjustable-rate mortgage so they can enjoy a lower payment in the early years of their mortgage term. The problem with these mortgages is that rate increases in the future can skyrocket a home loan payment. Some borrowers take this risk betting on the fact that their income will increase in the future. But this is a gamble you shouldn’t take. There are no guarantees that your income will increase. If a rate increase results in a much higher mortgage payment, yet your income remains roughly the same over the years, this can trigger payment problems and raise the risk of foreclosure. Adjustable-rates are a smarter options for people who plan to move before their first rate adjustment.

Factors That Can Delay Your Mortgage Approval


Getting pre-approved is one of the first steps you’ll take when buying a house. This involves providing your lender with income information and giving the bank authorization to check your credit. Based on your income, credit history and assets, the bank can pre-approve your mortgage and determine how much you can spend on a property.

But although pre-approvals prove you’re a serious buyer and qualified, these approvals are conditional and don’t guarantee a mortgage. A mortgage isn’t technically “approved” until the end of the underwriting process which can take 30 to 45 days. And unfortunately, numerous situations can delay a final mortgage approval.

  1. Paperwork delay

During the initial process, you’ll provide the lender with several pieces of documentation to help the underwriter assess whether you’re eligible for the loan. This includes paycheck stubs, most recent tax returns, bank statements and other paperwork to give the bank a clear picture of your financial standing.

At some point before closing, the bank may ask for additional paperwork. This is customary. This can include updated bank statements to verify assets, or an updated paycheck stub or profit-and-loss statement to make sure your income hasn’t changed. The sooner you provide your lender with this information, the sooner the underwriter can finish processing your loan. Any delays on your part can affect your mortgage approval.

  1. New credit inquiries

A few days before closing, your lender will check your credit again. During the underwriting process, you shouldn’t apply for new credit or significantly increase your credit card balances. If your mortgage lender checks your credit and sees new inquiries, this can raise questions and delay a final approval. The lender will have to investigate to check for new accounts opened since getting pre-approved. Opening a new credit account can affect your mortgage approval because new debt reduces borrowing capacity.

  1. Appraisal issues

Although an appraisal issue is beyond your control, it can delay a final mortgage approval. This is because banks will not lend more than a property’s value. If you purchase a home and agree to pay $250,000, but a bank’s appraisal determines the home is only worth $235,000, the bank isn’t going to approve the loan because the sale price is $15,000 above the home’s current value. To get the loan approved, you’ll have to renegotiate the sale price with the seller, or pay the difference out of your own funds.

  1. Employment surprises

With regard to your employment, do not hide anything from your mortgage lender. Even a seemingly minor employment change can delay your mortgage approval. For example, if you plan to start maternity leave before closing, make sure your mortgage lender is aware of your plans. Or if you know you’ll switch positions or change companies at some point before closing, tell your lender about this change ahead of time.

Prior to closing, the bank will contact your employer again to re-verify your employment status and income. Finding out that you no longer work for the company or that you don’t hold the same position can delay the mortgage approval.

What to Expect at a Mortgage Closing


After the final walk-through of a property you’re purchasing, the next step is attending your mortgage closing. After your underwriter receives all documentation to complete your file—such as your most recent paycheck stub and a copy of the appraisal—he’ll send your entire loan file to the closing agent who handles the closing.

The process takes place at a title company or a real estate attorney’s office. By this time you’ve already received your final Closing Disclosure form which explains your terms and mortgage costs. But even if you understand the mortgage terms, you may be unfamiliar with an actual closing. If you’re a first-time home buyer, here’s what you can expect.

1. How long does closing take?

The length of a mortgage closing varies, and depends on whether you have questions or run into problems. On average, a mortgage closing takes about one hour or one and a half hours. Sometimes, closings are longer. For that matter, don’t schedule a mortgage closing on your lunch break. Allow a couple of hours to complete the process. If you have to work, plan to work a half day.

2. What types of documents will I sign?

Closing on a mortgage loan can take longer than expected because you’ll sign a stack of paperwork. Your closing agent explains each document, and you’re required to sign or initial each copy. Forms you’ll sign or initial include your final Closing Disclosure, the loan application completed for your lender, real estate transfer documents (such as the deed), as well as several home loan documents including the mortgage note and the mortgage agreement.

The closing agent doesn’t read every word on every document, but rather highlights certain key points. For example, he may highlight your loan amount, mortgage term and interest rate, as well as your monthly payment and where to send your mortgage payment every month.

If you have any questions during the process, ask the closing agent to go into further detail. Your mortgage lender isn’t present at closing, but the title company or real estate attorney overseeing the process is knowledgeable and can answer your questions.

3. When is the best time to close on a mortgage?

You can close on a mortgage loan at any time of the month, but closing toward the end of the month can reduce your closing costs.

Closing costs include prepaid interest, and the amount you pay in prepaid interest depends on the number of days left in the month. Therefore, closing on September 28 instead of September 15 means you’ll only pay two days of prepaid interest instead of 15.

But while you should close toward the end of the month, don’t wait until the last day of the month. If possible, close a couple days before the end of the month and give yourself wiggle room in case there are delays. If the closing is delayed until the beginning of the next month, you’ll owe almost a full month’s of prepaid interest which increases your closing costs.

4. When do I get my keys?

Although closing is exciting, the one unexciting part is giving the title company or the real estate attorney a check for closing costs. There are costs associated with a home purchase. This includes the loan origination fee charged by the lender, title search fees, attorney fees, discount points, etc. Closing costs can range from 2% to 5% of the mortgage loan, and funds are due at the closing table.

Your Closing Disclosure form, which you receive three days before closing, has information about cash needed to close. You can wire funds to the closing agent or bring a certified check.

The closing agent will collect funds at the end of the appointment. After making a copy of your drivers license and the closing documents, the closing agent returns with the keys to your new property.

How to Become Educated About the Mortgage Process


A mortgage will be your biggest and most important loan. Getting approved involves a lot of paperwork and you’ll stay in close communication with your loan officer throughout the process. First-time homebuyers are often overwhelmed and don’t fully know what to expect. But with research and pre-education, you can become familiar with the steps involved in getting a home loan. The more you know, the easier it’ll be to navigate the next 30 to 45 days —which is the average time it takes to close on a mortgage.

How do you educate yourself? Here are three steps you can take to gain a better understanding of the home loan process.

1. Educate yourself online

When buying a new home, no one expects you to know everything about mortgage loans. You will have questions and concerns. The good news is that many professionals are willing to assist, including your loan officer and your real estate agent.

You can, however, reduce some of the fear and stress of getting a mortgage by educating yourself before meeting with a lender. There are plenty of resources and tools. A quick online search can produce various reputable blogs and publications dedicated to mortgage loan information. You can learn about different home loan products from these sites, down payment requirements for different loans, credit score requirements and other helpful tips to help you make the right choice. Additionally, you can visit bank websites. Several banks that offer mortgage loans have a mortgage FAQ page filled with answers to commonly asked questions.

2. Meet with the mortgage lender

Even if you read mortgage articles and blogs, you may still have questions. At this point, schedule a sit-down meeting with a mortgage lender. A one-on-one conversation with a loan officer can deepen your understanding of the process. You’ll learn what to expect from start to finish, plus your loan officer can provide clarification and recommend loan products based on your unique circumstances.

But don’t meet with one bank. Make plans to meet with at least two or three loan officers from different banks. By doing so, you can compare information and make an educated decision regarding the best home loan for you.

3. Take a homebuyer education course

Homebuyer education isn’t required for every home loan. Some loan programs, however, require at least one borrower on a loan to complete an online course in homebuyer education. This is the case if you apply for Fannie Mae’s HomeReady program. But homebuyer education isn’t only for people choosing this type of loan—anyone can take advantage of this provision.

Several private organizations offer in-class instructions or online homebuyer education. Talk to your real estate agent or mortgage lender for information on local programs. These classes don’t take a lot of time, and can usually be completed within a few hours. You’ll receive unbiased advice on buying a home, plus information on managing a mortgage, improving credit and choosing the best financing.

Paying a Mortgage with a Credit Card: What You Should Know


You probably have different options for paying your mortgage loan. This includes writing and mailing a check, making a one-time online payment, or setting up recurring payments so funds are automatically drafted from a savings or checking account. Depending on where you bank, you may also have the option of paying your mortgage with a credit card.

This is a convenient feature. But before you enter your 16-digit credit card number, there are a few things you should know about paying your mortgage with a credit card.

Pay With a Credit Card and Avoid Late Fees

Some people could argue that paying a mortgage with a credit card is absurd and should be avoided at all cost. But the situation isn’t black or white. The truth is, there are times when paying your mortgage with a credit card makes sense. The key, however, is knowing the correct way to approach the situation.

Several reasons could justify paying a mortgage with a credit card. Let’s say you’re a self-employed worker or an employee who only gets paid once a month. In a perfect scenario, you’d receive your paycheck before bills are due. But things don’t always happen according to plan. Rather, your paycheck or direct deposit might be scheduled for a couple of days after your mortgage due date.

You have a choice: either pay your mortgage late or use a credit card to tide you over until funds arrive. Ideally, we should have an emergency savings account for these types of situations. But if you don’t have access to funds, using a credit card is the lesser of two evils.

Paying a mortgage late results in late fees, which could be as much as $30-$50 depending on your mortgage lender. And if your mortgage payment is more than 30 days past due, your lender will report the lateness to the credit bureaus and your credit score could drop as much as 100 points.

Using a credit card to pay your mortgage can prevent late fees and a damaged credit score. To be abundantly clear, you should only use a credit card if you’re able to pay off the charge as soon as your paycheck arrives. You shouldn’t carry a mortgage payment on your credit card for longer than a few days. This can increase your debt load, and you could end up paying double interest—interest to your mortgage lender, as well as interest to your credit card company.

Earn Reward Points for Each Mortgage Payment

Paying a mortgage with a credit card is also worth consideration if you have a credit card that lets you earn reward points redeemable for hotels, airfare, merchandise and statement credit, or if you have a cash back credit card. Since your mortgage is likely your biggest monthly expense, you can earn reward points faster. The more reward points you earn, the more you can save in other areas.

But again, this approach is only cost-effective when you pay off the credit card within a couple days of using it for your mortgage payment.

It’s important to note that not every mortgage lender allows credit card payments, and some that do charge a fee for this service. Talk to your lender and inquire about service fees.

What Income is Considered When Buying a House?


Mortgage rates are at historic lows, so now’s as good a time as ever to take the plunge and purchase your first property or buy another home. Since job stability and regular income are paramount if you’re thinking about a home purchase, make sure you have your financial house in order before meeting with a mortgage lender.

Good credit helps you qualify for a mortgage and receive a low interest rate, but lenders also evaluate your income to determine how much you can spend on a house. For that matter, you need to know which types of income a lender uses when qualifying applicants.

1. Salary/paycheck

If you’re an employee and receive a W-2, your mortgage lender needs documented proof of this income. This includes copies of your tax returns from the past two years, as well as paycheck stubs for the past 30 to 60 days.

Typically, you must be gainfully employed for a minimum of two consecutive years to qualify for a mortgage. If you switch jobs during this two-year period, you must remain in the same field and your income must stay the same or increase. It’s important to note that a lender qualifies you based on regular income, not overtime pay. Since overtime pay can change from week to week or month to month, lenders don’t consider it a reliable source when determining mortgage affordability.

2. Self-employed income

Although it’s more challenging for self-employed people to qualify for a mortgage, a home loan isn’t unattainable for these borrowers. The key is good record keeping and providing the lender with sufficient proof of income.

If you are self-employed and don’t receive income from an employer, lenders will rely solely on information in your tax returns to qualify you for a mortgage. You’ll need to provide two years of complete tax returns including all schedules. Lenders use your income after business expenses or deductions to determine how much you can afford to spend on a house. Therefore, you might limit your number of tax write-off’s for two years prior to purchasing a home. Write-offs reduce your taxable income, which can make it appear that you earn less than you do.

3. Military income

If you’re active-duty military, you can also use this income for qualifying purposes. In addition to your regular salary, your lender will count any housing and food allowances you receive as income.

4. Child support and/or alimony

Support payments also count as income when applying for a mortgage loan. There are, however, stipulations for using this income. Typically, mortgage lenders only count this income if there’s a court order and you have written documentation confirming the amount you receive each month. In addition, you must provide a paper trail showing that you’ve been receiving support payments on a consistent basis for the past six months to 12 months. Keep in mind that some lenders will only consider support payments if you’ll continue to receive this money for a minimum of three years after closing. Since requirements vary by lender, talk to your loan officer for more information.

5. Other income

After retiring, income you receive from Social Security benefits or a retirement plan (such as an individual retirement account, pension or 401(k)) also counts as regular income when applying for a mortgage. You can also use income you receive from rental property, as well as any interest and dividends you receive from a bank account or company

How a Foreclosure Affects Your Future


A foreclosure is a traumatic experience, especially if you did everything in your power to remain current on your home loan and keep your property. Unfortunately, if you default and miss several mortgage payments, your lender has no choice but to foreclose.

A foreclosure has an effect on your future, but the damage doesn’t last forever. It is possible to rebuild your credit, and luckily, the foreclosure disappears from your credit report after seven years.

But although your long-term outlook may seem brighter, you’ll still have to deal with the immediate effects and understand how a foreclosure affects your future now.

1. It is harder to rent a house

After a foreclosure, it may be harder to rent a house or an apartment. Some landlords check credit reports, so they’ll likely see a foreclosure in your recent past. As a result, they may charge a higher security deposit or require a cosigner on the lease. A cosigner is someone with an excellent credit history. This person doesn’t have to occupy the home or apartment, but they are responsible for the rent payment if you terminate the lease early.

2. It can kill your credit score

Foreclosures can destroy your credit score. And unfortunately, the higher your credit score before the foreclosure, the more points you’ll lose. On average, a foreclosure can reduce your credit score by as much as 300 to 200 points.

3. It takes time to qualify for another mortgage

There are many causes of a home foreclosure, and in most cases, a foreclosure has nothing to do with your level of financial responsibility. A foreclosure can happen after a job loss, a divorce or an illness. But even if you get back on your feet soon after losing your home, it can be a while before you’re able to purchase again.

Typically, you’ll have to wait between three and seven years before you can qualify for another mortgage. The wait period depends on the type of home loan and the lender. For example, if the foreclosure was due to extenuating circumstances such as an illness, and your mortgage was current before this setback, a lender may approve your home loan application after only three years. However, other lenders might not offer an approval until after you’ve hit the seven-year mark.

4. You may need a 10% down payment

If you’re able to qualify for another mortgage before a foreclosure falls off your credit report, some lenders will require a higher down payment, despite the fact that you’ve rebuilt your credit. These lenders may require a minimum down payment of 10% instead of the normal 3.5% and 5% which is typical with FHA and conventional home loans.

5. It could affect other areas of your life

Not only does a home foreclosure make it harder to rent an apartment, it can also affect other areas of your life. A bad credit rating makes it harder to qualify for certain types of jobs, especially those in the finance industry. Additionally, if you apply for certain insurances, you may pay a higher premium. Some utility and cell phone providers will also require security deposits because of your lower credit rating.