Buying after a short sale or foreclosure

Our buyers just lost their dream home yesterday because of recent changes in the lending requirements for those with a short sale or foreclosure on their credit. All of us were devestated at the news, so below is a quick guide for those who are interested in buying a home again. For those with a short sale or foreclosure on your credit, you will need to wait 36 months from the actual settlement date, in order to buy. There are very few exceptions to this rule, as we found out yesterday. So for those of who are nearing the 3 year mark, as well as you first time home buyers, below is an informational guide and a mandatory "to avoid" list. First, get together with your local banker or loan officer and have them pull your credit. You will need to repair, pay off or settle any collections, late's or derogatory line items. Those will need to be settled for 30 days before starting a loan. Your credit score will need to be a minimum of 620 but settling debts and paying items off can and will eventually increase your credit score. Second, continue to pay all of your bills on time, while also putting every extra dollar you have, into the bank. USDA and VA have a $0 down loan, otherwise FHA is the next best option, requiring only 3.5% of the purchase price as down payment. Even better, that 3.5% can be borrowed from a family member should you not have it all. This money needs to be in an account and verified by the bank before the close of escrow, it is called seasoning. Last but not least, here is a very quick list of things not to do before you buy a home. It seems very simple I know, but as our clients found out yesterday, these are often overlooked and can be devestating to a purchase. 1. Don't buy with or establish any new credit 2. Don't change jobs 3. Don't buy a new car (seems like a joke, it is NOT) 4. Continue to pay your bills On Time 5. Be patient, short sales can take up to 120 to close. Happy house hunting all!