Home Ownership After: Short Sale, Deed In Lieu, Foreclosure and/or Bankruptcy
This article is written specifically for the benefit of those adjusting to a new financial reality and again wanting to enjoy the security, pleasure and financial advantages of homeownership.
While each of the above four headline events present separate consequences, all have much in common. Each will reflect negatively on your FICO scores. All are a matter of record. The fact is this information is reflected on both your credit report and as a public record. Many think credit problems are just on credit reports. This is a myth.
Another myth is that any of these “negative” events will prevent you from achieving homeownership for 3-7 years. Frankly, the myth, the urban legend, keeping many from recovery is expecting too much too soon. Realistically speaking, by doing everything suggested, it is going to take nine months to a year to begin to realize optimal results.
A question we are frequently asked is: How long until we can buy a home? There are several correct answers and there are mitigating and extenuating circumstances to each answer as well. From the Discharge date of a Chapter 7 bankruptcy it is 2 years until one may qualify for either a FHA or VA mortgage.
From the final date on a foreclosure it is 3 years before one is eligible for either a FHA or VA mortgage. Again, keep in mind there are mitigating and extenuating circumstances which we will discuss in future articles. Such circumstances can shorten the time it takes to qualify.
From the conclusion of a short sale it can take up to 3 years to qualify for either a FHA or VA mortgage. It can take up to 3 years to qualify for either a FHA or VA mortgage after a deed in lieu of foreclosure. To qualify for a conventional mortgage will take 4 years, in most cases.
For now, concentrate on the basics. Rebuild your credit and avoid new bad credit. This involves two things working for you side by side at the same time. Both take time.
Item one is cleaning up derogatory credit history as best possible. See my blog titled Credit Repair.
Item two: As discussed in a previous post, you must reestablish credit – in particular you need to establish revolving credit (credit cards) accounts – this is essential to your recovery. It may be in your best interest to ignore the advice of those advocating low limit ($200/500), high cost credit cards. The better course of action is to join a credit union, save up $1,000.00 or more dollars and secure these savings with a credit card. We will discuss this strategy in future posts.
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