Many homeowners that lost their homes to a foreclosure or short sale between 2007 – 2013 are now back on the market searching for another home that they can call their own. Industry experts predict that this segment of the population will account for about 10% of all homes purchased this year and possibly even more in the next few years.
Many of the industry guidelines as to when individuals that have experienced a previous foreclosure or short sale are able to qualify to buy another home have been changed. A good example of this is the Back to Work loan program that was introduced by the FHA (Federal Housing Authority) just last year. As long as potential home buyers are able to prove that the loss of their home was in fact due to financial hardship that resulted in a minimum 20% reduction in income than they may be able to qualify for a new home loan in as little as 12 months . Other conditions must also be met including the completion of a “housing counseling” course as well as providing proof that they were considered to be “credit worthy” before the loss of their home.
Borrowers that have never had any late payments on their mortgage need not wait at all but default buyers (such as those whom have sold their home on a short sale) still need to wait 36 months before they can qualify for an FHA loan. Home owners that have experienced a foreclosure are subject to a 24 month waiting period.
This is good news for home seekers as compared to most conventional loan requirements. Those whom lost a home due to foreclosure and defaulted on their loans may still need to wait as long as seven years; a much longer time period than most short sale sellers. Those buyers that previously sold a home on a short sale that are able to come up with a 20% down payment can expect a waiting period of 2 years as compared to a possible 4 year wait for a 10% down payment.
Naturally these rules can vary from one area to another but the good news is that exceptions can be made if one is able to show good reason for their past problems such as divorce, job loss, serious illness or death of the primary wage earner. If you have experienced the loss of a home in the past due to circumstances beyond your control it just might be time to start searching for your next home!