Many Homeowners are again interested in buying a home after a short sale or foreclosure. Those hurt by the Recession are now becoming eligible to purchase homes again. FHA’s Back to Work Program reduces the waiting time to just 12 months for those homeowners who went through a foreclosure or short sale during the Recession. These buyers have spent the last few years rebuilding their credit in order to buyer again.
To qualify to buy a home after a short sale or foreclosure, the lender will require a lot of documentation and the short sale or foreclosure must have been a result of an economic event such as loss of income (at least 20% decrease), job relocation, etc. You need to have had good credit prior to the short sale or foreclosure as well as reestablishing good credit now in order to buy a home.
Guidelines vary with lenders on how long the wait is to purchase again after a short sale or foreclosure. FHA has a 3 year wait to obtain a new FHA loan with Fannie Mae or Freddie Mac. If the foreclosure was included in a bankruptcy, the buyer only has to wait 4 years. Interest rates may be higher. There is a 2 year wait for buyers who completed a short sale. Waiting periods don’t start until the foreclosure or short sale is completed. Some buyers may qualify for a new mortgage after just a year if they had at least a 20% cut in income. This is FHA’s Back to Work program.
If your credit was impaired only by a foreclosure or short sale, you should be able to repair your credit faster than buyers with other issues.
A foreclosure remains on your credit report for 7 years and you will see the impact fading as time goes on. Make sure you have reestablished your credit by paying other bills on time. A foreclosure can have less negative impact than if you have many late or missed payments.
Homebuyers should speak to a lender familiar with the Bank to Work Program to see if they qualify to buy a home after a short sale or foreclosure. Lenders may also be able to counsel you on any credit issues you may have (no charge) and give advice on how to remedy. A housing counseling class is also required for this program.
Ginny Vickers REALTOR SFR ABR MRP 540-842-9819
1st Choice Better Homes and Land, LC
1302 Bragg Rd. Fredericksburg, VA 22407
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Licensed in the Commonwealth of Virginia