This doesn’t mean that you should have the maximum debt ratio allowed. Lenders want to know that your risk of default is minimal. This doesn’t give you a lot of room for other debts, which is a good thing. Conventional loans typically require a debt ratio of 28% upfront and 36% on the back end. Lenders are going to look at all risk factors that pertain to your loan after a foreclosure. It’s important that you wait until you are at your current job for at least two years before you try to apply for a mortgage after foreclosure. If you lost your home because you lost your job or your income decreased due to circumstances outside of your control, you can show improvement by showing higher income and more stable employment.
They want compensating factors that make them believe beyond a reasonable doubt that you will lose your home in a foreclosure again. What lenders look for is stability and a reason to show that you are not a risk of default. If you have income that is higher than it was when you lost your home, you offset the risk of default. You want to show lenders that your risk of default is low. Try to have consistent and if possible, increasing income. If you change jobs, it should be within the same industry to show that you have the experience necessary to succeed. Lenders want to know that you are consistent with your employment. This means:Įstablish an employment history at the same job or at least within the same industry. If you want to give lenders a reason to give you a loan after losing your home, your income and employment should be as stable as possible. If you lost your home in a foreclosure, though, they are going to look at your employment/income even closer. Typically, lenders look back at the last two years to determine if your employment is stable. They want to see stable income and employment, especially after you 10% – credit mix – Try to have a good mix of installment debt and revolving debtĪnother factor lenders look closely at is your income.10% new credit – Open new accounts sporadically.15% length of credit history – Try to keep even old, unused accounts in good standing open.30% amounts owed – Try to keep your extended credit to 30% of your available balance.35% payment history – Pay your bills on time.
Your credit score is a combination of the following factors: Have a good mix of installment loans and revolving debt.