The good news is you can buy a home after a short sale or
A lot of individuals and families had to Short Sale their home
due to illness, the loss of a job or other financial hardships, and others
whose homes were foreclosed on have since gotten themselves back on their feet
financially and would like to purchase a home again.
That’s why lately I had a lot of people ask me how soon they can
purchase a home after doing a short sale or foreclosure. This is one of the
best times to buy a home: mortgage rates are at record lows, there’s an
increase of desirable, affordable homes on the market to choose from, and with apartment
rents have gone up, making it cheaper to own a home than it is to rent in many
areas. Ready to make a fresh start but aren’t sure when or if you can buy a
The truth is a lot of people fear that after they lose their
home they will never be able to buy again or believe they have to wait for 7-10
years to buy a home again. You may even get conflicting information on how long
you have to wait to get a loan or if you would even be eligible.
How Does a Short Sale Affect Your Credit?
§ A short sale and a foreclosure will have a negative impact on
your credit score, but in every situation we have seen, the impact is less with
a short sale.
§ The biggest impact to your credit is always caused by late
payments and with foreclosures taking much longer than a short sale, there are
more late payments for the credit bureaus to account for.
§ Credit bureaus are more forgiving if the loan is “settled,” like
it is in a short sale, while in a foreclosure or a deed in lieu, a “default” is
§ The lender will have to verify that
you have re-established your credit as well as consider other factors, such as
your current salary, your debt-to-income ratio, and your savings.
How to Prepare to Buy Again After a Short Sale or Foreclosure
The first thing you need to do is get your credit back in shape.
Here are some of the basics:
§ Establish credit at least one year before you apply for loan
§ Pay down or, if you can, pay off any credit cards you have
§ Get rid of credit cards you don’t use
§ Identify unnecessary expenses, cut back on spending
§ Have documentation for income, expenses, credit history
Figuring Out How Much You Can Afford
The next thing you will need to do is figure out how much you
can comfortably afford each month in order to own a home. Calculate monthly
expenses such as car and credit card payments to get an idea of what you’ll be
able to afford.
One of the best ways you can make buying again easier is to hire
a qualified mortgage broker who specializes in doing loans after a short sale
or foreclosure. A good mortgage broker will verify your credit and also verify
your income. The reason this is so important is because it’s a key component
that underwriters use to insure you qualify. If it is not done at the
pre-approval stage it can lead to a very disappointing turn down further into
Using a good qualified mortgage broker is Key.
Of course the mortgage payment is just one cost of owning a
home. Be prepared to spend a portion of your income on repairs, heating and
cooling costs, and overall maintenance of your home as well.
But by following these guidelines and getting your finances back
in order you’ll be able to enjoy the benefits of owning a home again.
Contact Me for A List of Qualified
Mortgage Brokers and Get Started on Your Path to Home Ownership Again