Purchasing a Home after a Short Sale

Millions of Americans have experienced financial difficulties since the residential housing bubble in 2006.  Due to a variety of reasons (i.e. unemployment, illness, job relocation, etc.), these homeowners have lost their home to a short sale, bankruptcy, or foreclosure.  In some cases, you can immediately get another home unless you missed your payments.  After a short sale, a consumer is eligible for a FHA loan.  On December 16, 2009, HUD addressed all approved mortgagees in a letter about short sales and short pay offs that some borrowers are considered eligible for a new FHA-insured mortgage if they are current on their mortgage and the proceeds from the short sale serve as payment in full.  In some cases, there have been potential homeowners approved in three years after a short sale for a new home with conventional financing.  A foreclosure or bankruptcy will last a lot longer (in most cases at least four years and probably longer to get another home).  Even if you have to go through bankruptcy, a short sale of the real estate will be better in the long run in reestablishing your credit.  Although many people assume that after a short sale or foreclosure, they will not be able to get a home.  However, that assumption is not always true.

Prior to obtaining a mortgage, a lender will ensure that you have reestablished credit.

Even though a short sale can have a negative impact on your credit rating, there are ways to reestablish your credit.  You can reestablish credit with a secured credit card or a low limit credit card.  You can also open up a CD and have a line of credit secured by the CD to help establish credit.  Lastly, you should pay your bills on time and pay off and/or carry a low balance on any credit cards.

Although a short sale is a temporary bump that a lot of people have gone through, a short sale does not necessary disqualify you from obtaining a mortgage, but rather how you handle building your credit back to obtain a mortgage.  If you focus on credit building, home ownership can be a realty again rather than a dream.

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