“Amnesty” Coming For Foreclosures and Short Sales?
If you are a former home owner who has lost your home to foreclosure, or completed a lender approved short sale, it looks like there are some definite guidelines that stipulate just how long you may have to wait to purchase a new home…and it may not be as long as you think.
Up to now, understanding how a derogatory credit event (fancy way of saying foreclosure or short sale) effected your future buying ability was a closely guarded secret akin to the Coke formula. Everyone had a guess, but no one had any specifics. However, in an effort to eventually bring so many displaced former home owners back into the real estate market as buyers, FHA has recently provided specific guidelines for just such circumstances as these. Here are the basics.
FORECLOSURES…If you lost your home to a foreclosure, your wait period is 3 years from the date the home was transferred back to the bank. With extenuating circumstances, this time period can be reduced to 2 years (or maybe even less), but never less than 12 months. The definition of “extenuating circumstances” is open to interpretation to allow for unique circumstances, but the general rule of 3 years will apply unless you can get a waiver for your situation.
SHORT SALE…If you completed a short sale, the wait is also 3 years from the date you transferred the property to the new owner…BUT…there is no waiting period if you had no late mortgage or consumer debt within the 12 months prior to the short sale, and the reason for the short sale was hardship, and not just bailing on a property that had lost value. **As a note here, it is very hard to get an existing lender to grant the short sale unless your are behind in your payments, so this is a bit of a Catch 22 situation. Our thought is that the mortgage component of this stipulation will get changed at some point in the future, but for now, there is way to get right back into a home provided you qualify.
There are also stipulations if you have had either a Chapter 7 or 14 bankruptcy. They are a bit more detailed (too lengthy to go into here), but in general, your wait is anywhere from 1-2 years, depending on your type of bankruptcy and your credit since the date of your discharge.
Please understand that these above guidelines are simply that…guidelines. Lenders understand that every situation and every buyer is different, and they really do a good job of trying to paint an individualized picture for all potential borrowers. That is why they can offer exceptions to their guidelines sometimes. Each case is different.
Also, remember these guidelines are only good for FHA loans. In time, there is no doubt that conventional loans will probably head the same way…but for now, FHA is leading the way.
In the end, it seems that the “powers-that-be” are realizing that owning a home is the American dream, even after all the “junk” that has come down the real estate road the past few years…and loan programs that offer a way for former home owners to re-purchase real estate are probably beneficial to all. It gets more buyers back into the system, which will increase home sales…which is good for everyone.
So…if you fit into one of the categories above, take heart…you may be back in the market for a home sooner than you thought.
You can follow any responses to this entry through the RSS 2.0 feed.