Foreclosure Not The End Of The World
Posted by David Rosenfeld on Mar 8, 2013 - 7:55:24 AM
LOS ANGELES—Going through a foreclosure is never fun. The impact on your self-esteem and your family can be devastating. Losing your home is emotional & traumatic. After a foreclosure it’s hard to think about buying another home anytime soon.
A foreclosure on your record does not mean you still can't own a home.
But from my experience, it can be done. Buying a home a couple of years after a foreclosure is not as far-fetched as people think. I just had a client that had her home foreclosed just two years ago and when she came to me about the chances of getting a new loan and buying new home, I told her the chances were good. Although she didn’t believe me at first, she eventually came around to the thought that foreclosure is not the end of the world. Soon, I got her a loan and now she’s a proud owner of a wonderful home in Oceanside.
It’s a great story. And it shows that there are things you can do to ease some of the pain and stigma of having a foreclosure on your credit record. Granted, it’s not a good thing to have on your history so it’s good to be concerned while you work on rebuilding your credit.
Begin by immediately dedicating yourself to paying your bills on time, if not on time then pay them early! And keeping track of your expenses so you have enough funds to pay all your debts on time. Remember, you must prove to potential lenders that you’re a responsible individual who pays his or her bills on time.
This is especially important because you can be eligible for Federal Housing Authority loans just two years after a foreclosure. Although this is not a “slam dunk,” by any means – you still have to prove you are a good risk by demonstrating that you don’t have any late payments over the past two years and that there are no liens or collections actions over that same period – thus you may be able to qualify for an FHA loan in as little as two years.
To learn more contact a real estate professional and tell them your story and what you are doing to improve your credit. Listen to your loan professionals suggestions on how to stay on track!
If you’re planning to apply for an FHA Loan, keep in mind these requirements:
- Demonstrate on-time bill payments since the foreclosure or bankruptcy
- A minimum 640 credit score
- Be able to have a minimum 3.5 percent down payment for the loan
- Demonstrate significantly low debt-to-income ratio to show you can continue to make payments over the life of the loan.
Even short sellers can overcome the negative impact of a short sale on your record by doing the same things. A short sale takes place when a seller and lender agree to sell a property for below the amount that is owed to the lender, leaving a deficit or loss by note holder.
If you’re a short seller, make sure you continue to make on-time payments to the lender as you move forward with a short sale. This is somewhat rare for short sellers, but if you plan to rebuild your credit, it’s essential you continue to make on-time payments to the lender.
A foreclosure and a short sale both demonstrate a loan default and are seen as a sign of potential risk to future lenders so the earlier you start to rebuild your credit the better.
David Rosenfeld is a Real Estate broker and president of Advantage Real Estate, a Real Estate and investment firm in Santa Monica, and a Rotary Club member. He has more than 20 years experience in commercial and residential property investments and financial counseling. He can be reached at 310 450-4488 and at firstname.lastname@example.org.