Bankruptcies,
foreclosures and short- sales don’t have to be long-term home-buying death
sentences.
In
fact, Valley home-loan officers say the wait to be able to buy a new home after
one of these events may be much shorter than most people think — depending on
individual circumstances, as well as how much buyers are willing to shell out
in fees and monthly payments.
The
waiting game
“There
are lots of portfolio programs that say ‘one day out of bankruptcy,’ or ‘one
day out of foreclosure,’ but those are going to definitely cost you in terms of
fees, monthly payment and down-payment because the lenders have to offset their
risk,” said Amy Swaney, branch manager for Citywide Home Loans in Scottsdale.
“It all depends on what you’re willing to do to get back into a home.”
Those
who short-sold homes but had made payments on time up until the short- sale was
completed fare the best.
“If you
were current at the time of closing, you don’t necessarily have to wait for an
FHA loan,” Swaney said. That’s compared to a three-year wait after a
foreclosure and two years after a bankruptcy, as long as the bankruptcy didn’t
also include a foreclosure, she said.
A
Fannie Mae or Freddie Mac loan will take longer to land, though, Swaney said —
typically four years after a short-sale and up to seven years after a foreclosure
without extenuating circumstances.
“But if
you think about it, the housing crisis started for many in about the middle of
2007, and we’re already seven years away from that,” Swaney said. “So if
someone filed bankruptcy or foreclosure at the peak, they would be able to go
out and get a traditional mortgage right now and not have any problems with
that.”
For
buyers looking to move more quickly, licensed loan originator James LaVanway
said a mortgage banker like him is the way to go. LaVanway, with Guild Mortgage
Company in Tempe, said that if you were current at the time of your short-sale,
“you can buy practically the next day.”
Because
mortgage bankers can either service their own loans or sell the loans as a
correspondent lender, they have many more products available to them than
national banks, LaVanway said. “An experienced mortgage banker is going to have
more tools at their disposal,” he said. “That’s because we don’t sell our loans
to one place — we sell to multiple places.”
Credit
is king
Every
prospective buyer who has experienced a bankruptcy, foreclosure or short-sale
should spend time checking and repairing their credit, regardless of the type
of loan they ultimately want. That’s because interest rates are always a
reflection of credit scores, LaVanway said, adding that lower scores are a
higher risk.
That’s
why Swaney said the first thing a person should do after experiencing one of
these negative financial events is to pull their credit report — and then pull
it and review it every six months after that to ensure that everything has been
reported correctly and there are no mistakes on the report that are causing the
score to dip lower than it should.
“A lot
of times, a short-sale has been reported inaccurately because there’s no incentive
for that lender to make sure the information is 100 percent accurate,” she
said. “So it’s going to be up to you to make sure it’s reported the way you
think it should be reported.”
Deal
with it head-on
The
time to start the credit clean-up process is right away.
“People
often want to put their head in the sand and ignore it and hope it goes away,”
Swaney said. “But the best thing they can do is deal with it head-on. It’s not
something to be ashamed of — it’s some- thing to work through and to find a
lender that’s willing to work through it with you.”
Resources
AnnualCreditReport.com:
Pull free credit reports from
each of the three nationwide consumer credit reporting companies.
Consumer
Financial Protection Bureau (ConsumerFinance.gov): Submit a complaint about an inaccuracy on your
credit report, ask financial questions and get information to help you make
informed financial decisions.
