2013

Ah, the bad old days-when home buyers who picked strawberries for a living could buy a McMansion through a crooked lender. How many people lost their homes? Maybe you were one of the unlucky ones who lost their house or condo and had to short sell or go through foreclosure. Now many like you are looking to own again after painstakingly rebuilding credit over the last few years. But can you buy again and get a lender to give you a loan? According to RealtyTrac, “There were nearly three times as many short sales as there were sales of foreclosed homes in 2012.” Several sources reported that foreclosures were down a bit last year, but that “short sales rose 5% and accounted for 32% of all home deals” (CNN Money). RealtyTrac also reported that the ‘average discount on a foreclosure was a whopping 39%, while the average short sale sold for 23% below market” in 2012.

Yes Virginia, you can get a mortgage if you’ve been diligent to keep your life in good order and your credit has improved. The new required waiting periods for borrowers who have experienced short sales or handed in their deeds back to the bank in lieu of foreclosure are simple:

1) 2 years out of the darkness if you have 20% down
2) 4 years out of the woods if you have 10% down
3) 7 years past hell if you have 3-3.5% down.

I’m not a lender. Each bank, credit union, or loan broker will have their own set of particulars when handing out loans to consumers. My preference is to use a loan broker, because they shop all the loans for you from all the resources for loans on the market. The biggest challenge after you live through a short sale, foreclosure and/or bankruptcy is changing your behavior to make sure you pay all your bills on time forever and ever. Better yet-reduce your bills and save some money! If you want to purchase again, go into a good lender NOW and let them help you review your credit and make suggestions how to repair your credit and pay off the RIGHT bills. You might think that disputing all your bad credit will help you but that may a bad plan because your credit report can then be frozen while claims against it are checked. If claims are thrown out then your credit goes up. If they are proven true then your credit goes down. You have to know what’s best to dispute. Also, thinking you should pay off and close out all of your credit accounts isn’t a great plan. It may be better on a revolving account to just pay it off and keep it open because closing it will erase the history that you paid it off. Kapish?

Other important items to know about your credit in general: 1) late payments stay on your credit for 7 years; 2) if a creditor sued you and won a judgment, that little factoid will also haunt you for 7 years. What if you had a bankruptcy? That can stick to your credit ratings for up to 10 years from the date you filed.
Nowadays with low housing inventory and multiple offers on homes, it’s standard to present the seller with a pre-approval letter that you’ve been to a bank and had your credit checked, that you look worthy to purchase the home if the negotiations pan out for you. Thus, don’t start window shopping for houses yet-get thee to a good lender and get the hard part over with!