Don’t let a Foreclosure or Short Sale stop you from buying a home!
Millions of Americans lost their homes in the housing market crisis and are currently renting. Naturally many of them wonder whether they will ever be able to become a homeowner again. According to the Federal Housing Authority (FHA), for many the answer is "Yes". However, there are some strict conditions for those who have previously had a foreclosure or short sale on their home, particularly if they are looking for an FHA loan to buy a home. The new FHA “Back to Work – Extenuating Circumstances” Program is allowing borrowers who lost their homes due to financial hardship to apply for a mortgage again in as little as a year. Previously they stipulated a 5-7 year wait for those who have had a foreclosure on a property and 2-4 years for those with a short sale history. However, to qualify for an FHA loan on a property in Arizona you must meet three strict criteria:
1. Proving that the Foreclosure or Short Sale was Beyond Control of the Borrower
Former homeowners need to show that the foreclosure or short sale on their previous property was caused by an event beyond their control. Examples include long-term unemployment or loss of income of at least 20% for at least six months. Those with a shorter period of delinquency or borrowers who worked with their mortgage holder to find a solution will be looked on more favorably than those who simply walked away from their property.
2. Show You Have Fully Recovered Financially
Potential homeowners must be able to show they have fully recovered from the catastrophic event that led to the foreclosure or short sale of their former home. This includes showing they are settled in long-term employment and can afford to make mortgage repayments. Potential borrowers also need to show a good credit history prior to the foreclosure. Make sure you are building satisfactory credit by paying rent, bills and credit cards in a timely manner. If you have past judgments for unpaid debts, try to clear them and improve your credit score dramatically. In the long run it will save you money through lower mortgage interest rates. In some cases a deficiency judgment will be recorded on your credit report for the amount of the shortfall in a short sale, or for the full amount owed including legal fees in the case of foreclosure. This will have a lasting negative impact on your credit score, which is why agreeing to a deed-in-lieu of foreclosure is usually a better solution where possible.
3. Attend Counseling with an Approved Housing Counselor
Those wanting to apply for an FHA loan for an Arizona home need to complete at least one hour of personal counseling with an approved councilor from the Department of Housing and Urban Development within 6 months of applying for a loan. Keep in mind, your past credit history may mean you have to pay a much larger down payment and a higher interest rate. Those hoping to buy a home despite a foreclosure or short sale in the past can make every month count as they wait. Work diligently to improve your credit score and save as much money as possible towards a down payment, which may be a higher percentage than in the past. Eventually it will all pay off and you will be able to obtain a mortgage and become a proud homeowner again.
I have Credit Repair experts, and Mortgage Brokers who can help position you for success! In fact, you can click the link below to see if you would qualify WITHOUT talking to a lender or a Real Estate Agent!
Have any questions? Give me a call and we can discuss what’s best for your situation.