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When Can I Repurchase a Home Again After a Short Sale or Foreclosure?

By
Mortgage and Lending with Citywide Financial Corp

"When can I repurchase a home again after a Short Sale, Foreclosure or Bankruptcy" is a question that many people are asking these days. As the housing downturn started in 2007, which is now 6 years ago, you will find that more and more buyers who suffered a financial hardship over the past few years, will be in a position to qualify to repurchase a home again soon! Here are important repurchase time lines to know, along with some recent positive updates, so you know exactly when a buyer can purchase again and obtain financing after suffering either a Short Sale, Foreclosure or Bankruptcy.

First of all I wanted to share some good news! I will be writing articles for the Real Estate section in the San Diego Union Tribune Newspaper! The first article will be featured tomorrow Saturday the 30th. I hope you can check it out:)

Buyers Today Essentially Have 3 Financing Options

Buyers today essentially have 3 options when it comes to obtaining financing. Currently more than 9 out of 10 mortgages are either funded by Fannie Mae/Freddie Mac, the FHA or VA! So if a buyer is looking to purchase and needs financing, it is more than likely they will be using one of these 3 financing options.

Therefore if you know the repurchase rules for these 3 programs when a buyer can repurchase again after suffering a short sale, foreclosure or bankruptcy, you will now be able to let your clients know exactly when they can purchase again! Knowing these rules will also help you focus your time and efforts wisely too, because if you know someone is only 2 months away from being able to repurchase as opposed to 1 year, you can now focus more effort on the buyer who can purchase the earliest!

1. When Can I Repurchase Again After a Short sale?

Here are the time lines for when a buyer can repurchase again after a Short Sale and they are trying to obtain either Conventional, FHA or VA financing.

FHA. It is 3 years before a buyer can repurchase again using FHA financing. *TIP: The FHA has a loophole that not many people know about, if the FHA buyer did not have any late payments before their short sale, they are allowed to automatically qualify again for FHA financing.

VA. It is only 2 years before a buyer can repurchase again using VA financing.

Conventional. Until recently it was 4 years before a buyer can repurchase again using Conventional financing. TIP: But Fannie Mae implemented a new rule recently that allows buyers to repurchase again using conventional financing after only 2 years instead of 4, as long as they put 20% down (see chart below) and their loan application is approved by the Fannie Mae automated underwriting engine. Contact me for more details.

2. When Can I Repurchase Again After a Foreclosure?

Here are the time lines for when a buyer can purchase again after a Foreclosure and they are trying to obtain either Conventional, FHA or VA financing.

Conventional. It is 7 years before a buyer can repurchase again using FHA financing.

FHA. It is 3 years before a buyer can repurchase again using FHA financing.

VA. It is only 2 years before a buyer can repurchase again using VA financing.

3. When Can I Repurchase Again After a Bankruptcy?

Here are the time lines for when a buyer can purchase again after a Bankruptcy and they are trying to obtain either Conventional, FHA or VA financing.

Conventional. For a chapter 7 Bankruptcy it is 4 years and 2 years for a chapter 13 bankruptcy, before a buyer can repurchase again using Conventional financing.

FHA. For a chapter 7 Bankruptcy it is 2 years and 1 year for a chapter 13, before a buyer can repurchase again using FHA financing.

VA. For a chapter 7 Bankruptcy it is 2 years, and 1 year for a chapter 13 bankruptcy, before a buyer can repurchase again using VA financing.

Help Buyers Rebuild Their Credit Now

As the housing downturn is now 6 years old, you will start to find that more and more buyers you talk to who did suffer a financial hardship in the past, will now be in a position to buy again soon.

But it is very important to find out if these buyers have started to re-establish their credit again since their hardship, because even though the required time line of say 2 or 3 years may have passed so they can qualify for FHA financing, it is important they have started to rebuild their credit and have the required credit scores to qualify again for financing. For example, the FHA and VA only require a 620 credit score to repurchase again. Therefore a good idea is to give buyers tips on how to rebuild their credit, so they can get in a position to repurchase soon!

The first step is for someone to get a copy of their credit report to verify if their financial hardship or discharge is reporting correctly and to also see what their scores are. Let your buyers know they can go to www.annualcreditreport.com to get a FREE copy of their credit report (CA consumers are allowed 1 free credit report per year).

Then the next step is to start rebuilding their credit scores, here are 5 Quick Credit Tips that you can share that will help someone rebuild their credit faster.

*If you know someone who needs major credit repair, I send my clients to a lady named Linda Ferrari, she is an expert on credit repair and has written books on the subject of credit repair too, you can check out her work HERE.

Reach Out To All Past Clients, Friends and Family

There are many buyers who suffered a financial hardship in the past that are already getting back into the market again to purchase a home. As Conventional financing now requires only 2 years (if the buyer has 20% down), and the VA only requires 2 years from a short sale or a foreclosure, and the FHA only 3 years, you probably already know some past clients who can repurchase again.

A lot of buyers I talk to who suffered a financial hardship in the past are genuinely shocked when they realize that the FHA or VA for example allows them to purchase again after just 2-3 years!

A good idea is to check the dates with any clients you helped short sale in the past, and also reach out to any family or friends you know who also suffered a short sale, and verify how much time has elapsed since their financial hardship, so now you can let them know how soon they can re-purchase again using these time lines above.

Make sure they know too how important it is that they rebuild their credit, and that they should contact you if they need credit tips on how to rebuild their credit.

If you have any questions about any of this information  above, or you would like to get approved for financing, please do not hesitate to contact me directly at 858-442-2686.

P.S. If you would like to be updated faster on important industry news or any new loan programs that come out, join my Facebook page Free Resources For CA Real Estate Agents. There are now 6,000 Real Estate professionals sharing tips and resources on this page.