Does an Eviction Affect Your Ability to Buy a House?

>>Ask an Expert Agent Your Questions<<

An eviction is a legal process where a landlord has the legal right to remove a tenant who violates the lease terms agreement. Common lease violations that can lead to eviction include failure to pay rent, excessive property damage, or disruptive behavior.

No renter wants the embarrassment and upheaval of being evicted. But even after picking up the pieces and moving on, the eviction can still affect your ability to buy a house in the long term.

While an eviction makes getting a home loan more challenging, it doesn’t automatically disqualify you. With some work, you can get your finances back on track and realize your homeownership goals.

What Happens to Your Credit Score If You Get Evicted?

Unfortunately, an eviction can seriously hurt your credit score. While the eviction won’t appear on your credit report, related actions like collections and lawsuits will. If your landlord sends unpaid rent or fees to a collection agency, it’s one of the worst dings you can get. This can instantly drop your credit score by 100 points or more.

Unpaid debts in collection accounts will remain on your credit history for a painful seven years. Since payment history makes up 35% of your score, missed or late payments from an eviction will continue to haunt your credit.

But it can get worse. If your landlord wins a judgment against you in eviction court, this public record can also appear on your credit report. Legal judgments stay on your credit file for seven years, too.

The end result is often a trashed credit score after eviction, which can obstruct your chances of getting future loans, credit cards, and mortgages. Even renting a new apartment gets tougher with bad credit.

Luckily, there are steps you can take. If you think you might be evicted, it’s best to get ahead of the process and break your lease first.

If you think you’ve been wrongfully evicted, you can dispute and remove inaccurate eviction information from your credit reports.

Furthermore, you can pay off collections to help improve your score under newer credit models. But the lasting impact underscores the importance of protecting your credit before, during, and after an eviction.

What Happens If You Break a Lease Early?

Ending a lease early in your rental property can be a tricky situation, but it’s better for all parties involved than going through an eviction. While breaking a lease is preferable to getting evicted, it still requires care and planning.

The good news is that, with some negotiation and compromise, you can often reach an agreement with your landlord to terminate the lease without long-term consequences.

The key is to avoid an eviction at all costs. An eviction goes on your permanent record and makes renting very difficult in the future. On the other hand, a negotiated lease termination or “lease break” does not negatively impact your rental history as long as you and your landlord officially agree to end the lease.

There are a few common ways to break a lease cleanly:

• Paying a lease break fee (usually 1-2 months rent). This cancellation fee lets you end the lease early through a negotiated agreement with your landlord. Make sure to get the lease termination in writing.
• Finding a replacement tenant so the unit doesn’t sit vacant. If your landlord is required to mitigate damages by law, they have to help you find a new tenant so you can leave. This is another way to break a lease without stiff penalties. Try cleaning up your space, listing it online, and networking to find a new tenant to take over your lease.

No matter what, avoid an eviction at all costs. Work with your landlord to negotiate a clean break from the lease. An eviction filing stays on your record and hurts your ability to rent for years, even if you did nothing wrong. Breaking a lease the right way allows for a fresh start.

Can You Buy a House with an Eviction?

An eviction itself does not directly lower your credit score. However, it can still influence a lender’s decision to approve you for a mortgage in several ways:

• Outstanding debts related to the eviction, like unpaid rent or property damages, may show up as collections or negative marks on your credit report. This can significantly hurt your credit score and make it very hard to get a loan.
• A mortgage lender may ask for a formal explanation of the eviction circumstances and proof that any debts were paid, even if they don’t appear on your credit report.
• They may contact previous landlords, who could provide negative details about lease violations leading to the eviction.
• The public record of the eviction proceeding can also be accessed and viewed by lenders.

So, while an eviction won’t automatically disqualify you from getting a mortgage, it does raise red flags. Expect lenders to dig deeper into your rental history and require extra reassurances before approving a home loan.

You may need to shop around for a lender willing to work with your specific situation and expect to pay a higher interest rate.

Evictions are Reported to Credit Bureaus

An eviction is not necessarily a deal breaker, but lenders may ask for additional proof that your debts are paid and require a formal letter explaining the conditions of your eviction.

An eviction itself does not show up on your credit report, but related debts, like unpaid rent, that go to collections will be reported and damage your credit substantially.

Resolving your outstanding balances and improving your credit scores over time helps overcome the lasting impact an eviction can have on mortgage approval down the road.

How Lenders View Evictions

Lenders see an eviction on your credit report as a red flag that you have not paid a past debt obligation. This makes you appear as a potentially higher-risk borrower to lenders.

Even if the eviction itself doesn’t show up, associated collections or negative marks related to unpaid rent or damages will be seen negatively as they do a rental history background check. Lenders know these types of credit dings directly stem from an eviction.

As a result, mortgage lenders will view your application with greater scrutiny and caution if you have an eviction history. You may still get approved for a mortgage loan, but expect less favorable loan terms because the lender will mitigate their perceived risk.

Impacts of Getting a Loan with an Eviction

An eviction on your record can impact your ability to qualify for a mortgage and the loan terms you are offered. Even years after the eviction took place, lenders will still take the eviction into account when reviewing your application.

While it is possible to get approved eventually, you should expect lenders to carefully scrutinize your situation and make adjustments to loan terms in order to mitigate their risk.

Here are some of the ways lenders might adjust loan terms if you are approved for a mortgage with a past eviction:

• Higher interest rates – Lenders may charge a higher rate to offset the risk of lending to you. This means higher monthly mortgage payments.
• Higher down payment – A larger down payment requirement helps limit the lender’s potential losses if you default. Expect at least 10-20%.
• Extra fees or costs – Application fees, origination charges, or other costs may be padded on top of normal amounts.
• Shorter loan term – You may only qualify for a 15 or 20-year mortgage instead of a 30-year loan.

While it is possible to get a home loan after an eviction, expect lenders to take steps to protect themselves.

Mitigating the Impact of a Past Eviction

Having an eviction on your record can feel like a permanent barrier to buying a home. While the eviction cannot be erased, you can take constructive steps to mitigate its negative impact on lenders’ perceptions.

Repair Your Credit Score

The most important thing you can do is focus on repairing your credit score. Pay off any collections or outstanding debts related to the eviction. Then work to build a solid track record of on-time payments and responsible credit use.

Over time, you can request that credit bureaus remove the eviction once it is seven years old. A higher credit score indicates you have moved past the eviction.

Document Financial Stability

In addition to credit, lenders want to see signs of financial stability. Maintain steady employment and income over a period of years. Your bank records are a great resource to show that you know how to manage and save your money.

Start building savings and make on-time rent payments to show responsibility. Lastly, be prepared to draft an explanation letter for the eviction, describing how your situation has improved.

Should I File for Bankruptcy?

Unfortunately, filing for bankruptcy will not clear an eviction from your credit report or background check.

While bankruptcy is a great tool to help restructure debts, it does not remove or undo eviction records (or student loans).

Instead, focus on incrementally bettering your financial health and rebuilding credit. With time and diligent savings, you can recover and qualify for a mortgage again.

Overcoming an eviction is a long process but not impossible. If you want to know if you can qualify for a loan, or get more detailed steps on how to qualify, talk to a a reputable mortgage broker.

FastExpert makes it easy to connect with top mortgage providers in your area. Read reviews, talk to brokers, and find one who is experienced working with buyers who have a history of eviction.

Addressing Your Credit Report

Having an eviction on your record can severely damage any good credit score and make it much harder to qualify for loans or rentals in the future. While eviction records cannot be completely erased, there are steps you can take to address negative marks on your credit report related to an eviction. With time and persistence, you may be able to remove certain derogatory information and improve your credit standing.

Steps to Get an Eviction Notice Off Your Credit Report

Here are some steps you can take to get eviction-related collections or negative items removed from your credit report:

1. If you feel your eviction was unjust, meet with an attorney to review the case. They can determine if you have grounds to contest the eviction in court.
2. Handle any unpaid rental balances or fees stemming from the eviction head-on. Try to pay in full or negotiate a documented settlement agreement.
3. Once debts are resolved, draft a letter asking collection agencies to delete entries from your credit report. Be persistent in following up.
4. Request that landlords remove the eviction from background checks and tenant screening reports as part of your settlement. Get it in writing.
5. Carefully review your credit and rental history to confirm the eviction and collections no longer appear. If they do, move on to dispute.
6. Submit disputes backed by evidence, like settlement paperwork, to credit bureaus and screening firms. Press them until they are resolved. Don’t take no for an answer.

Explore Mortgage Options

Getting approved for a conventional mortgage with an eviction on your record can be very difficult, as most lenders view you as too high of a risk. However, there are some options that may be more accessible for those with challenged rental histories.

One potential option is an FHA loan – backed by the Federal Housing Administration. The FHA  tends to be more lenient than conventional mortgages when it comes to credit score requirements and background checks. While an eviction will still be factored in, you may have better odds with an FHA loan.

Other government loan programs, like VA loans and USDA loans, may also offer more flexibility if you meet their eligibility criteria. These programs aim to increase accessibility for those who have faced setbacks.

Look for brokers that specialize in helping clients buy a home, even with past evictions or foreclosures. They will know which loan programs provide the best shot.

Connect with top mortgage brokers through FastExpert and ask about FHA loans or portfolio loans from community banks. These programs may offer more flexibility than conventional loans, but with the right broker guiding you and loans designed for special circumstances, homeownership is not necessarily out of reach.

Preparing for the Home Buying Process After an Eviction

Homebuyers who have a past eviction on their record need adequate preparation to overcome this hurdle and get approved for a mortgage.

Here are some important steps you can take:

• Get pre-approved early. Meet with multiple lenders to compare options; FHA and other government-backed loans may provide more flexibility.
• Work on improving your credit score. Dispute any errors on your credit report related to the eviction – you have a legal right to dispute inaccurate information.
• Pay off collections and negotiate removal from your credit report and get agreements in writing.
• Gather all needed documentation for your application, like tax returns, bank statements, and employment verification. Keep your documentation updated.
• Partner with a knowledgeable real estate agent who can advise you through the process and suggest lenders with experience in navigating special cases.
• Research down payment assistance for first-time buyers programs recovering from financial hardship – these can help you buy sooner.

You Can Buy a Home Again

If you’re worried about eviction, remember that the best solution is to avoid it at all costs. However, an eviction on your record doesn’t mean homeownership is out of reach forever.

Focus on improving your credit score and financial footing post-eviction. Seek out alternative mortgage programs and down payment grants tailored to your situation – the right loan exists if you do your research.

Partner with reliable real estate and lending experts who specialize in eviction cases. Their experience is invaluable and gets results. Connect with experienced agents and lenders through FastExpert to find professionals who can help your unique situation.

Most importantly, don’t lose hope. With adequate preparation and the right professionals guiding you, the dream of homeownership can still become a reality, despite past evictions.