Once you start to fall behind on your mortgage payments, there is the possibility that you will end up in foreclosure. Indeed, there could be a time when you find no other way but to allow your property to be foreclosed because there was no opportunity for your financial situation to improve at that point in time. However, this does not mean that you will always remain in that situation. There may come a time in which things have picked up again, and you are ready to apply for a new mortgage. Unfortunately, many lenders will likely decline your application upon knowing your foreclosure. However, if you can explain that this was due to real financial hardship, you may find a lender who may approve your application.
Tips in Writing a Hardship Letter After Foreclosure
If you were in genuine hardship, a lender may consider this when deciding whether or not to provide you with a new mortgage. However, you will have to submit significant evidence to prove your situation. Additionally, you must write a proper hardship letter.
A hardship letter is a personal document. You must use it to provide an overview of the situation that you were in, and how this eventually led to your foreclosure. The letter, in this instance, must also prove that your hardship has now ended.
The hardship letter after foreclosure has to be a formal letter. This means that you have to give factual reasons, such as the death of a spouse, involuntary reduction in hours and income, loss of job, relocation, incarceration, divorce, or medical bills, and other past problems. Essentially, you must provide factual details about the personal circumstances that have affected you. At the same time, these should be clear, concise, short, and to the point.
If at all possible, you should keep the letter contained to a single page. It should provide all the important details:
- Why you were in difficulty
- When the difficulty started
- Why you are now no longer in difficulty
It is quite difficult to prove to a lender that your credit history reflects a glitch in your circumstances and is not, therefore, a full picture of who you are today. Indeed, that is why credit files exist. However, this does not mean that it will be impossible for you to get back on the property ladder after some time. Situations resulting to hardship are mostly beyond your control, and lenders do realize that.
Remember that the hardship letter after foreclosure is a formal document. It will be kept on your permanent file as well. Hence, you should write it in a business style, addressed properly, and with your account details in the subject line. Do also make sure that you include photocopies (not originals) of every piece of evidence you supply. The letter should be free from spelling or grammatical errors and it is recommended that a third party proofread it for you. Lastly, send your letter via registered post and do follow up if you have not received a reply within one week.
Hardship Letter After Foreclosure Example
{Your Name}
{Your Address}
{Your Phone #}
{Date}
To Whom It May Concern:
I am writing this hardship letter to request that the waiting period between conventional mortgage loans be reduced in my case. The foreclosure on my previous house was due to a number of extenuating circumstances beyond my control, and I foresee no such difficulty in my new situation.
I was forced to foreclose on my former residence because of {job loss, illness, family death, be specific}. Because this sudden change caused a devastating {monetary amount} loss to my income, I could no longer pay my mortgage. Foreclosure was the only option for my situation. I have attached {documents} as a testament to my honesty. My financial detriment had nothing to do with overspending or irresponsible purchases.
Since my foreclosure, however, I have regained my credit through {getting a new job, paying off bills, etc. Be specific}. I have attached my last two credit card bills, a copy of my credit report, and last year’s federal income tax return to prove my present situation. I am financially stable and able to easily cover mortgage payments. I would like to take advantage of the current housing climate, but I cannot get a loan for another {number} years.
Please contact me at the aforementioned number at your earliest convenience. I am asking that the loan waiting period be reduced from the traditional 4 to 7 years to {number} years. I look forward to speaking with you regarding this matter.
Sincerely,
{Sender Name}