www.forsaleinspain.com
I guarantee that not one person who bought a primary residence prior to the mortgage meltdown years of late 2008-2011 ever believed upon receiving the keys at closing that they would one day lose their home due to an inability to make the payments. Sure-there were borrowers who had no business being approved for a mortgage. Even so, even the most challenged buyer intended to make the payments.
The upshot of 2008-2013 is this-the market is improving. Homes are appreciating again and people are back to work. The economy is getting better. The massive inventory of foreclosed homes is greatly reduced and diminishing. Give it another year or two and the foreclosure crisis will be nothing but a bad dream. But what about the people who lost their homes?
Here is one thing I can tell you-Americans are an exceptionally resistant lot. During the worst of the downturn we would have people call our company and say: "I'd like to apply for a mortgage."
"Great," we would reply-"Have you selected a house?"
"Yup-123 Main Street, USA. That's my house!"
"Oh, so when we close your loan that will be your house."
"No-I mean that's my house. The bank took it back last month."
Even people who had gone through the trauma of eviction, the foreclosure process and bankruptcy were ready to jump right back in the saddle and buy. Unfortunately what many of them found out was that they were able to obtain financing to buy a new home because of the previous foreclosure. The story of financial hardship created by the economy wasn't a sell that mortgage companies were buying or were able to buy-all the rules regarding mortgage loans having changed in the aftermath of the worst financial disaster since the Great Depression.
Foreclosure along with its sisters, Short Sale and Deed in Lieu of Foreclosure, have all been treated the same by lending. You lose the house or sell it for less than what you owe, or give it back to the bank and you lose the ability to be loaned money for another. Many people who lost their homes were told or heard through the grapevine that this meant that it would be as long as ten years before they would be able to purchase another home.
Sadly enough, many real estate professionals including lenders gave home owners the wrong information about Short Sales and a Deed in Lieu of Foreclosure. Home owners were counseled in many cases that a short sale or Deed in Lieu of Foreclosure wouldn't impact them as badly as a foreclosure would.
This advice was dead
Not only did short sales and deeds in lieu of foreclosure severely impact people's credit scores-the same rules apply that apply to a foreclosure in terms of future lending.
So what are those rules? The rules are:
Three years have to elapse between the sale of the house at the sheriff's sale before the home owner is eligible to apply for a mortgage loan. The loans available to the home owner would be government loans-FHA, VA and USDA. Conventional lending requires 7 years unless the borrower can put down more than 10%-then it is 4 years.
So hat happens at the sheriff's sale? Why is that the date that starts the clock? This is the date the deed transfers out of the homeowner's name into the new owner's name-normally the bank. So if you had a foreclosure you will need to go to the county in which the home was located and obtain a copy of the sheriff's deed-easy enough to do-just give them the address and ten bucks or whatever they charge and there is the proof of when the deed transferred. Many folks don't know when the sheriff's sale occurred as they left the home long before that happened. The same is true of short sales and deed in lieu ofs. Three years from the transfer of the deed. If you had a short sale you will have a settlement statement proving title change and if you had deed in lieu of there will be a paper trail from the bank. These documents are normally required to prove the three year seasoning period. Of course credit has to have recovered and any bankruptcies will have to have been seasoned two years from date of discharge-date of discharge-NOT date of filing. Normally the bankruptcy is discharged before the sheriff's sale as foreclosures take a while to go through the legal process.
There are some exceptions- often differing from lender to lender. Conventional lending will allow two years from a short sale on a conventional mortgage if the borrower puts 20% down. This eliminates the need for mortgage insurance so the rules are a little less strict. Someone who has had a short sale may be allowed a new loan after 2 years if there were no delinquent mortgage payments the twelve months preceding the short sale-an event that we don't normally see-but it could happen. One of our lenders allows less than three years seasoning on a short sale if the borrower qualifies for a USDA loan and there is no outstanding FHA, VA or USDA mortgage debt.
However, for most people the rule of thumb is that if you have had a foreclosure, short sale or deed in lieu of foreclosure, you will be eligible three years from the date of the sheriff's, shorts sale settlement or transfer of deed in a lieu of foreclosure situation for an FHA, VA or USDA mortgage. You will need the settlement statement showing the sale for short sales and the deed showing the transfer out of your name for the other two. You will also have to have rebuilt credit.
So there is good news that there is home ownership after foreclosure-it just takes a little time.
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