A short sale or foreclosure on your credit history can make it difficult to purchase a home again, but that doesn’t mean it won’t happen. In most cases, a little time and careful attention to rebuilding your credit can make you a homeowner once again.
Repairing Your Credit
The first step to getting approved for a home loan after a short sale or foreclosure is to work on repairing your credit. There will be a waiting period before you can apply for a loan again, but the best thing to do during that time is get your credit score back up.
Work on making smart financial decisions, paying off debts in a timely fashion, and ensuring you don’t miss payments on credit cards or other loans. Make sure to monitor your credit so that inaccuracies don’t damage it further.
Waiting Periods For Loans
After a short sale, you will be obliged to wait a certain period of time before you can apply for a home loan. This wait is usually three years for an FHA loan or four years for a conventional loan. Recent changes, however, have allowed buyers to purchase through FHA in as little as one year or through Fannie Mae in as little as two years, if special considerations are met.
After a foreclosure, the wait for a loan is usually seven years. For FHA, this wait is three years. Again, special considerations can significantly shorten this time span.
If you qualify for a VA loan, you can buy in as little as two years after either a short sale or a foreclosure.
The special considerations usually mean demonstrating that an unforeseen hardship caused your short sale or foreclosure, and that you have recovered financially from that hardship.
Working With A Broker
Each situation is a little different, so it’s best to contact a mortgage specialist who is experienced in working with past difficulties to figure out your best plan of attack for getting a new mortgage. An expert can assist you with determining which mortgage program you qualify for and how long your personal waiting period will be.
A mortgage expert can also help you to determine how much you will need to save for a down payment on a new home, and what you will be able to afford in terms of a monthly payment.
When you are forced to short sell or face a foreclosure, renewed home ownership can seem out of reach. But with careful planning and the help of an expert, you can own a home again sooner than you think.