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Buying a home after a short sale
A short sale refers to a type of real estate sale that allows the property owner to sell the property for less than the remaining balance owed to the property’s lien holders. While short sales do not necessarily absolve the property owner from having to pay the remaining balance at some point, some short sales can have such a factor included in the agreement. The upside of a short sale is many fees and additional costs are not required to be paid. The downside of a short sale, beyond having to sell off the property, is that it will result in the property owner receiving a negative credit report.
While a negative credit report can weigh heavy on some people’s shoulders, one should not become burdened with a sense of failure and deep concern for how a short sale will affect their future purchase capabilities. After a three year waiting period has expired since the short sale, a former property owner can once again qualify for an FHA loan for a new home. Those 36 months of waiting may seem like forever and a day when you are on the starting end of the cycle, but like all adults know, time flies and, before you know it, the waiting period has passed and a loan once again becomes a possible reality.
The best way to impress potential creditors is to have spent the previous three years paying bills on time. Making certain your finances are in order so they are well presented when the time comes to apply for another loan will increase the chances of getting the loan. Do not let surprises throw your plan for a loop. Keep records and keep your bills up to date, and you will find the financing will be there for you.
Beyond FHA loans, there is the option of getting a conventional loan, usually offered after a two year wait instead of the FHA three year requirement. If you plan for a non-FHA loan, you will need to have 20% to put down against the value of the home loan. If you wait 4 years, you will only need 10%, but you would also qualify for a much lower interest rate FHA loan at that point.
The three year rule is a guide, it is not a hard set reality. A good argument of extenuating circumstances that forced the short sale, such as flood damage or being relocated for work, may allow the wait to be reduced before you qualify for an FHA loan. The factors that would qualify as extenuating circumstances would be up to the discretion of the lender.
All told, there is hope for the property owner who had to do a short sale to once again find themselves in their own home. Do not despair, simply wait the time required and make sure you pay your bills on time, and you will once again find yourself being handed over the keys to a new home.