With the unprecedented housing crisis over the last six years resulting in more than four million homes lost to foreclosure, many of these homeowners are now beginning to wonder: When will they be able to buy again?
The problem for these people is that most lenders in the US have strict rules that prevent them from granting new mortgages to anyone who went through a short sale or foreclosure for up to seven years. Besides this, we also need to consider the damaging effect that a short sale or foreclosure has on somebody’s credit rating – it can take lots of hard work on the part of the former homeowner to repair their credit score to something which is acceptable for lenders.
Even so, not everyone has to wait as long as that. For those who lost their homes due to circumstances beyond their control, such as losing their job or illness, they may be able to get back on the property ladder sooner than they thought, claims a report by Associated Press.
Rosa Herwick, owner of Century 21 JR Realty in Henderson, Nevada, told AP that it may be possible for these people to qualify for a mortgage right away.
“They’re probably going to pay a little higher interest rate, but with rates so low, a higher interest rate of 4 percent is not a big deal,” she explained.
According to AP, the length of time an ex-homeowner has to wait will depend on which lender and/or government entity they borrow from. For Fannie Mae and Freddie Mac, the waiting period would still be seven years for anyone with a foreclosure on record, whereas an FHA mortgage only stipulates a three-year waiting period.
Those who opted for a short sale instead can often get away with a much-reduced waiting time, depending on their personal situation. For example, the FHA will waive its three-year waiting period if the former homeowner opted to short sell following a job loss.
Of course, we mustn’t forget that money also talks. For those who can come up with a significant down payment of 20% or more, Fannie Mae are happy to cut their seven-year waiting period to just two years.