THERE’S no question the economy has not been kind for many California families who bought and borrowed more than they can chew in the mid 2000s’. Bad things happen to good people and many folks fell victim to bankruptcy, foreclosures, and lost a home either through short sale.
Buying a home after this type of financial hurdle may be much easier than you think. With the recent increase in bankruptcy and foreclosure filings, lenders are changing their guidelines to allow potential homeowners to get back in the real estate market faster. Even just learning and preparing now for a future purchase is worth your time. The following explains how these situations affect purchasing a home based on the new FHA guidelines.
After Bankruptcy, buy again using:
– FHA – 2 years from the discharge of a Chapter 7 bankruptcy
– FHA – 1 year from the discharge of a Chapter 13 bankruptcy
– Conventional – 4 years from the discharge of a Chapter 7 bankruptcy
– Conventional – 2 years from the discharge of a Chapter 13 bankruptcy.
NOTE: If you include a mortgage in your bankruptcy there is also a separate waiting period if you end up losing the home to short sale, deed in lieu, or foreclosure.
These waiting periods run concurrently if you filed bankruptcy as well, so the longer of the two waiting periods will determine eligibility.
After Short Sale or Deed in Lieu of Foreclosure, buy again using:
– FHA – 3 years from date deed of trust transfer completed
– Conventional – 2 years from date deed of trust transfer completed if:
o 20% down payment | Minimum 680 credit score
– Conventional – 3 years from date deed of trust transfer completed if:
o 10% down payment | Minimum 680 credit score
After Foreclosure, buy again using:
– FHA – 3 years from date deed of trust transfer completed
– Conventional – 7 years from date deed of trust transfer completed.
Understanding what the waiting periods are to buy a home after foreclosure, short sale or bankruptcy can save you aggravation and money, as well as help you plan for the future
There are exceptions to the rule if its been 2 years + 10% down w/extenuating circumstances on Conventional and FHA loans. What determines an extenuating condition and who will approve the loan?
Yes, loss of income is an extenuating circumstance just as a divorce, a death of a spouse or a change of location mandated by your employer is. How it will affect your required waiting period to get a new loan depends on the type of loan you are trying to get. Still unclear and now a days you cant make offers on property unless you have a solid Pre-Approval Letter from a Lender.
I suggested you have to provide enough compensating factor to your lender in order for your loan to be approved. I don’t suggest minimal down payment, I would think that your down pay has to be at least 10%, your debt to income ratio will have to be below limits of about 45% which means you want to stay in the 38% range for your back end ratio. Funds have to be your own savings and preferably not gifted and finally the explanation letter for your delinquent payments prior to a short sale has to be validated with proof of your hardship.
I have been suggesting to homeowners wanting to do a short sale not to take advantage of missed mortgage payments, obviously the fewer lates prior to a short sale will be considered more favorable than someone not paying a mortgage for 2 years prior to a short sale.
No waiting period if borrower had no late payments on any mortgages and consumer debts within the 12 month period preceding the short sale AND they are not taking advantage of declining market conditions or purchasing a similar or superior home within reasonable commuting distance.
Most of homeowners that went thru the short sale in the 2-3 years ago are now trying to work on getting a new loan. Again, it is definitely worth a phone call to inquire about your option to buy a house. I am sure whom ever is renting is feeling the pain of paying high rents without too much benefits.
Home values are steadily looking rosier but interest rates are getting traction to move up maybe slowly but surely.
I advise that for potential homebuyers with credit issues to start to get on the ball and start finding out how to prepare yourselves, to be able to buy a house sometime soon.
* * *
Please Call Ken Go of 1st Innovative Finance Group to assess your credit and financial situation. Get a Free consultation about your options to be able to buy a house. Call Ken at (562) 697-7028 or write to[email protected].