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Saturday, March 30, 2013

Buying a Home After a Short Sale or Foreclosure

Written by John McGeough & Anthony Lamacchia,

In Massachusetts over 80,000 homeowners lost their homes through a foreclosure or short sale since the housing crisis started in 2006. Some of these people had to short sale their home due to job relocation or they may have had to sell their home due to illness or the loss of a job. And some people whose homes were foreclosed have since gotten themselves back on their feet financially and are ready to purchase a home again.

The good news is you can buy a home after a short sale or foreclosure, but there are just a few eligibility requirements to follow.

That’s why lately we’ve had a lot of people ask us how soon they can purchase a home after doing a short sale or foreclosure. They realize this is one of the best times to buy a home: mortgage rates are at record lows, there’s an increase of desirable, affordable homes on the market to choose from, and apartment rents have gone up, actually making it cheaper to own a home than it is to rent in many areas. They’re ready to make a fresh start but aren’t sure when—or if—they can buy a home again.
The truth is many of these people fear that after they lose their home they will never be able to buy again. They may get conflicting information on how long they have to wait to get a loan or if they would even be eligible.

How Does a Short Sale Affect Your Credit?

1. A short sale and a foreclosure will have a negative impact on your credit score, but in every situation we have seen, the impact is less with a short sale.

2. The biggest impact to your credit is always caused by late payments and with foreclosures taking much longer than a short sale, there are more late payments for the credit bureaus to account for.

3. Credit bureaus are more forgiving if the loan is “settled,” like it is in a short sale, while in a foreclosure or a deed in lieu, a “default” is recorded.

The lender will have to verify that you have re-established your credit as well as consider other factors, such as your current salary, your debt-to-income ratio, and your savings.

How to Prepare to Buy Again After a Short Sale or Foreclosure

The first thing you need to do is get your credit back in shape. Here are some of the basics:

Establish credit at least one year before you apply for loan

Pay down or, if you can, pay off any credit cards you have

Get rid of credit cards you don’t use

Identify unnecessary expenses, cut back on spending

Have documentation for income, expenses, credit history

Figuring Out How Much You Can Afford

The next thing you will need to do is figure out how much you can comfortably afford each month in order to own a home. Calculate monthly expenses such as car and credit card payments to get an idea of what you’ll be able to afford. Use our Mortgage Calculator or download our Home Buyer Budget Worksheet to figure out your expenses.

One of the best ways you can make buying again easier is to hire a qualified mortgage broker who specializes in doing loans after a short sale or foreclosure. A good mortgage broker will verify your credit and also verify your income. The reason this is so important is because it’s a key component that underwriters use to insure you qualify. If it is not done at the preapproval stage it can lead to a very disappointing turn down further into the process.

Of course the mortgage payment is just one cost of owning a home. Be prepared to spend a portion of your income on repairs, heating and cooling costs, and overall maintenance of your home as well.
But by following these guidelines and getting your finances back in order you’ll be able to enjoy the benefits of owning a home again.

My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.

The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.

It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.

Email me at

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