Buying a Home After Foreclosure

Due to continued high unemployment, home foreclosures reached record levels in 2010. And, many of these former borrowers are wondering how long it will take to be a homeowner again. According to the Century 21 Mortgage Professionals, home buyers that just lost their homes two years ago are buying a home after foreclosure.

According to RealtyTrac the banks seized 1.05 million properties and there were 2.9 million foreclosure filings during 2010. Compare that to 2005 before the housing market bust when just over 100,000 houses taken over by the bank.

RealtyTrac predicts 1.2 million houses will be repossessed during 2011.

After living through a bumpy ride of foreclosure; dealing with loss of income, then the roller coaster of loan modification and/or selling a home through the process of short sale, and, in many cases still losing the home through foreclosure – there is hope and light at the end of the tunnel.

Thanks to the new FHA loan guidelines, former borrowers who either sold through a short sale or lost a home through foreclosure can now qualify to purchase a home after just two years.

FHA realizes that if millions of former borrowers had to wait as long as 7 years, which was the standard a short time ago, the housing recovery would never happen. Therefore, the new FHA guidelines now allow qualified borrowers to purchase a home after only 24 months with a down payment as low as 3.5%.

John Anaya, Mortgage Professional for CENTURY 21 says, “In order to qualify for an FHA loan (as of the date of this article) borrowers need a credit score of 620. And I’m seeing people with no credit qualify. In other words as long as there are no dings on their credit and the borrower shows a willingness to pay their bills on time, they may qualify for a home loan at this time.”

However walking away from a mortgage the borrower can still afford to pay for – has consequences. In fact it may be impossible to get credit. While former borrowers that defaulted due to economic hardship have to wait just 24 months – walk-aways may face double that time!

Underwriters will be taking a close look at the borrower’s records, looking for evidence of precipitating factors, in other words, circumstances beyond their control. If there is no evidence of an economic hardship, banks will assume a ‘strategic default’, and may require higher credit scores, bigger down payments and charge higher interest rates.

If you have re-established your credit, and are paying your bills on time, the time to contact a Century 21 M&M Realtor is NOW, while it is a buyers market and interest rates are down. Happy house hunting!