Don’t despair; there is life in the housing market after a foreclosure, short sale or bankruptcy! Millions of people have been affected by one of these scenarios in the last few years when the economy and housing market crashed. They have been renting or living with family members after they were forced out of their homes. BUT, there is a light at the end of the tunnel. There are various time lapses required after these situations before a buyer is eligible again, but for many, this time period is either here or quickly coming up. FHA and VA are probably the most lenient in terms of this, but conventional loans are also available.
FHA allows buyers to purchase 2 years after a Ch. 7 bankruptcy and 3 years after a short sale or foreclosure. The minimum down payment requirement is 3.5% and there are programs for this as low as 580 credit scores, but the lowest score with no hit to rate is 640. Buyers should have no lates after these situations and have reestablished credit as well.
VA is probably the most lenient on the return buyers. They allow their veterans to return to buying power 2 years after a foreclosure, short sale or bankruptcy. In some extreme cases, they will even look at them 12-23 months after a foreclosure if there were extenuating circumstances for the event. The one thing to remember is that if the original loan was a VA loan and the VA lost money on it, it could affect the amount of the VA eligibility. This means that you might not be eligible for zero down and have to come in with a down payment, but you can get a loan.
Conventional loans are the most stringent on these buyers returning to the housing market. They need to wait 7 years after a foreclosure to be eligible to purchase again. There are some exceptions to this. After 3 years if there are severe extenuating circumstances, they MIGHT be eligible with a minimum of 10% down. On short sales, they are required to wait 2 years if they have 20% down and 4 years if they have 10% down. For any higher LTV’s they must wait 7 years. If they were in Ch. 7 bankruptcy, they can buy again after 4 years.
So, as you can see it might be time or soon to be time for many buyers who were forced to file bankruptcy or let their homes go to foreclosure or short sale to once again achieve the American dream! One bit of advice would be for them to get a credit report run with all 3 bureaus as soon as possible to see if everything is being reported correctly or if the foreclosure actually closed when they thought it did. Some people who included their homes in bankruptcies are under the mistaken impression that when the BK was discharged, so was their mortgage debt, but sometimes the actually foreclosure didn’t take place for 1-2 years after this and so their waiting period has now been lengthened. Please let me know if you have any buyers past or present who are thinking it might be time to hit the mortgage waters again so we can start the process of checking their credit and seeing which program will be most beneficial to them. www.karendunnloans.net
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