How Soon Can I Buy a Home After a Short Sale or Foreclosure?

BY IN Real Estate On 07-01-2013

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Contrary to popular belief, a short sale does not have the same impact as a foreclosure when it comes to your credit outlook and buying another home. It turns out that with FHA loans you can typically get into another home just two years or so after a short sale. You do have to have an approved hardship such as divorce, job relocation or death. This does not apply to anyone merely trying to take advantage of the distressed sale market.

Homeowners Should Stay Current On Payments, Despite a Short Sale

The single most important thing to keep in mind is how you treat your debts leading up to the short sale. As long as the preceding 12 months are handled with care and all payments are up to date, most loan officers and underwriters will not have a problem with lending you money again.

Distressed Homeowners Need to Put a Plan of Action Into Place to Rebuild Credit

It’s important to have a solid plan in place. But even then, many homeowners are forced to stop making payments on their home, which leads to short sale or worse, foreclosure. If that were to happen the next step is to work hard at rebuilding your credit. This is where it can take anywhere from two years or more to get back into a home. The variance comes in a couple different areas. First, if you have some money to put down on a home it will likely increase your chances of being able to borrow after a short sale or foreclosure. With a conventional loan if you have 20% of the purchase price to put down, you can reasonably expect to move in 2 years after a foreclosure. It will be 3 years if you have 10% to put down and so on.

Creditors Will Scrutinize Those Credit Scores

Another factor is your credit score. Many people are able to maintain a good credit score despite being in situations of financial hardship. This works to their advantage when they go to buy another house.
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The most critical piece to keep in mind is to maintain your payments and not be late on anything – even if you are facing short sale or foreclosure. Second, work to develop a game plan and then do whatever it takes to achieve your plan of action. For more information on this or anything else about a home in distressed situations, call your mortgage broker today.

One promising development that will also impact homeowners opting for short sale to relieve their financial hardship is that the Mortgage Forgiveness Debt Relief Act has been extended for another year. There had been much speculation as to whether or not this would happen in 2012 with the deadline the last day of the year but at the very last minute Congress decided to extend this benefit. Instrumental in helping struggling homeowners to get back on their feet, the Act provides tax relief by waiving the tax liability on discharged debt that would otherwise be considered income. 

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As always, we welcome the opportunity to serve you with this – and any other real estate concerns you may have. Contact us today so we can begin making your real estate dreams become a reality!


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