A foreclosure doesnt have to limit your dreams of buying a home. By following these strategies, you can lower your mortgage rate to affordable levels. And with some careful shopping online, you can find a lender willing to help you finance the purchase of your new house. The Better Your Credit Record, The Better Your Rates Yes, a foreclosure will sink your credit score, but only for a short time. And lenders also look at other factors when considering a loan application. Before you start looking for a home loan, glance at your credit report. Make sure your credit history is correct. You may also want to attach a letter explaining the circumstances of your foreclosure. Time will also improve your credit record. After two years, a foreclosure ceases to have a significant impact on your credit score. Instead, financing companies look at your payment history, number of accounts, and debt ratio. Improving Your Application For Lower Rates Improving your application will also help you qualify for lower rates. Increasing your down payment to over 20% will do much to lower your rates. You will also find that a low debt to income ratio will help. A large income or significant cash assets in some cases will also get you conventional rates, even with a recent foreclosure. Interest only and adjustable rate mortgages also lower rates. However, there is considerable risk with these types of financing. Large increases in monthly payments are possible. But you can protect yourself by insisting on appropriate caps or rollover options. Better Rates Tomorrow You can quickly improve your credit score after a foreclosure. So refinancing for lower rates in the future is another way to work toward lower rates. If this is an option, make sure you dont have any early payment fees in your original mortgage. The Best Lender With The Best Rates The easiest way to reduce your rates is to shop for a lender just like you would shop for a house. Request information, specifically loan estimates, to evaluate cost and options. Even though financial companies tie their rates to indexes, they vary widely. By investing a few hours in research, you can save thousands on the purchase of your home. |
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