LendingTree report reveals the impact for borrowers
Homeowners who lose their homes through foreclosure may believe that they are facing years of renting before being able to buy a home again.
But a new analysis from LendingTree shows that this may not be the case with many borrowers regaining entry to homeownership in as little as two years after foreclosure – but they will pay a premium.
The analysis from chief economist Tendayi Kapfidze discovered that 7% of borrowers who have a foreclosure end the year with a credit score above 680 while 2% are above 740.
After one year, 30% of borrowers have credit scores above 680 and 46% have scores above 740.
Borrowers are likely to see their credit score slashed by around 150 points or more following foreclosure and the increase is typically at a 10-point-per-year pace.
Premium cost
For those who want to re-enter the housing market two years after a foreclosure, the analysis shows that that with a 740+ score will pay an average mortgage rate of 5.02% compared to 4.70% for those who have never had or did not reflect a foreclosure in the past 7 years.
That means a $250,000 mortgage incurs an extra $17,135 in borrowing costs for borrowers with a score above 740 seeking loans two years after foreclosure.
