Buying Again after a Short Sale or Foreclosure15 May Brenda Warner
If you are one of the many thousands of homeowners who suffered financial hardship that resulted in you short selling your home or losing your home to foreclosure, when will you be able to rejoin this recovering market as a homeowner again?
If you have gone through a short sale or foreclosure, there are guidelines and requirements to qualify for another mortgage loan. Depending on what type of loan you are considering will dictate what the guidelines and requirements are. In addition to a standard waiting period, qualifying for a mortgage loan also depends on how much you can put down as a down payment and how many late payments you had on your old mortgage before the short sale was final or the property foreclosed.
If you went through a short sale two to four years ago, you may be ready to buy again. If you are considering a conventional loan, your wait time and down payment amount is more than if you are considering an FHA or VA loan. The table below outlines these waiting periods.
In the case of either a prior short sale or foreclosure, your credit score also plays a significant role in qualifying for another mortgage. Waiting periods and credits scores are both considered in loan approval decisions.
A short sale typically affects your credit score less than a foreclosure, but in either case, delinquent payments affect your score the most. The more late payments you have prior to the short sale or foreclosure, the bigger the hit on your credit score. Another factor that affects your credit score is how the short sale or foreclosure was reported to the credit bureau agencies. If your report shows your loan was 'settled', it is less harmful than if it was reported as a 'default'.
When homeowners are going through a financial hardship, delinquencies with other financial obligations are common. Maybe a few credit card or car payments were late or missed. Again, the payment delinquencies are what hurt your credit score the most.
Having gone through the short sale or foreclosure experience does not need to mean your credit is eternally ruined and you will never be able to own another home. If you are motivated and disciplined, you can follow this path to and be able to own another home.
After going through a short sale or a foreclosure, the best thing you can do is begin repairing your credit. After the event is over, get a copy of your credit report. Review the entire report for accuracy. If there is any information on your report that is not correct, dispute the information and have it removed from your report. Take inventory of all your accounts and delinquencies and put together a budget that will allow you to begin paying off any credit card debt and make all loan payments on time. This shows future lenders you have reduced your debt and shown good faith in reassuming all of your financial responsibilities.
Many lenders are willing to help you with this. They can go through your credit report with you and help you determine what changes to make to have the quickest positive impact on your score. If you begin making these repairs as soon as the short sale or foreclosure is over, you will be surprised what it will do to your credit score during your two to four year waiting period.
A good alternative to homeownership during this restorative time might be to find a good lease option opportunity. These programs allow you to live in the home as a renter with the agreement you buy the house 12 to 24 months down the road. During the rental period, a percentage of your rent payment typically goes toward your down payment. If you work at restoring your credit while you are renting the home, you may find that your credit has improved enough to qualify for a loan.
Pink Realty is the experts when it comes to working with distressed homeowners and their financial hardships. The help homeowner avoid foreclosure by selling their homes as a short sale and they work with the homeowners to help them reestablish themselves after the hardship. Pink Realty has a lease option program and lenders they refer to help you get back on your feed and begin getting your credit back on tract. Whether you are a distressed homeowner needing to sell your home as a short sale, a seller looking to rebuild your life after a short sale or foreclosure, or you are a buyer wanting to buy a short sale property, call the experts. Call Pink!