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How Soon Can You Buy After a Short Sale, Foreclosure or Bankruptcy?

One of the greatest questions people have regarding losing a home to foreclosure or selling in a short sale is, "Will I ever be able to buy again?"  The good news is that yes you can! There are some things you should know as you consider going through the process…

Foreclosure
A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years. FHA loans are backed by Fannie Mae and accounted for approximately 40% of all loans in 2010.  This number is expected to increase to 50% next year.

Short Sale
A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.

Investor Foreclosure
An investor who allows a property to go to foreclosure is ineligible for a Fannie Mae backed investment mortgage for 7 years.

Investor Sort Sale
An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

Possibility of Future Loans With Any Mortgage Company
When a buyer completes their application for mortgage they will be required to answer YES to the question on a standard form that asks, "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" this will affect future rates.  On the other hand, there is no similar question on this form regarding short sale so it's not an issue.

What Happens to Your Credit Score?
After a foreclosure your credit score can be lowered anywhere from 250 to over 300 points.  In a short sale situation only late payments on mortgage will show and after the sale a mortgage will be reported as paid or negotiated.  This will lower the score as little as 50 points if all other payments are being made.  A short sale's affect can be as brief  as 12 to 18 months.

Foreclosure damage to your credit history is more significant.  A foreclosure will remain as public record on a person's credit history for 10 years or more.

Do you think you need to sell in a short sale?  More than 70 percent of people who end up in foreclosure never respond to notices from their lender.  Working with a realtor who is a certified short sale specialist can relieve much pain and stress.  Authorization to communicate with the mortgage company can be given to a realtor on behalf of the homeowner, essentially relieving the homeowner of all communications.

The Watsons are active in local communities and have lived in the Northwest Suburbs for over 40 years. Their knowledge and experience will get you the results you want! ~ Jayne Smith, Palatine, IL