Help

Buying After a Short Sale or Foreclosure

 

The good news is you can buy a home after a short sale or foreclosure…

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 home again?

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 recorded.

§ 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 the process.

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



  • Buying After a Short-Sale or Foreclosure