Buying a home after a foreclosure or short sale?

Many people are starting to look at buying homes again after a foreclosure.  It is definitely possible, there are a few guidelines you have to follow.

If you had a foreclosure, Fannie Mae and Freddie Mac require a seven year wait after a foreclosure.  There are a few circumstances where you can buy earlier but you have to prove extenuating circumstances.  FHA requires three years after a foreclosure.  FHA did come out with a new policy that may allow you to buy after one year, but you will have to meet specific guidelines and it has to meet the Back to Work guidelines that FHA published in August.

In all cases you must have re-established your credit history and show that the reason for the foreclosure should not happen again. 

If you have had a short sale, the waiting period is much shorter, but again you need to show re-established credit.  FHA will allow you to buy after one year if you can show that the reason for the short sale meets the Back To Work guidelines.  There are also times where you can buy immediately, but there can not have been any late payments prior to the shortsale.   Fannie and Freddie both require taht you have at least four year and up to seven years after a short sale. 

With extenuating circumstances, you may be able to buy after two years, but you will also have to put 10% down on the new home.  Divorce, not being able to sell due to a work relocation are not extenuating circumstances.  Extenuating circumstances are typically a death to a primary wage earner or sometimes if the main employer in a small town goes out of business affecting your income.

If you think you may be eligible to buy after a short sale or foreclosure, contact your loan officer and see if you are ready.  If you are not quite ready, we can let you know what you need to do in order to purchase a new home.  Make sure your credit report is correct and your credit score is at least 640 or higher.  Most lenders want to see a 640 score for FHA and 660 or higher for conventional.  The worst thing that could happen is that you need to wait longer, the best thing would be that you are ready to buy now!

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants – EmailWebsite

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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