There is an old equestrian expression that relates to being thrown ignominiously from your horse and dumped unceremoniously in the dirt. And that is you have to get right back up on the horse that threw you - - if you don't you will be afraid to ride again.
Over the course of the last few years thousands of hard working, good people lost their homes to foreclosure or had to declare bankruptcy as a result of the Great Recession. This situation created a huge disruption in the housing market and in the lives of many ordinary people who were going about their business try to support a family. Now that economic conditions are improving I am beginning to see a trickle of folks who are inquiring about the possibility of becoming home owners once again.
The good news is that mortgage loans are available for those who lost their homes in the housing crisis. Fannie Mae and Freddie Mac now allow conventional mortgages to those whose foreclosure is four years in the past. And by four years, we are talking about the anniversary date of the sheriff's sale that removed the home owner's name from the deed, rather than the anniversary date of the foreclosure filing. But FHA, VA and USDA have even better news-their requirement is three years from the date of the sheriff's sale. The same rules apply for short sales. With most of the unpleasant housing trauma beginning to recede in the rearview mirror, we are beginning to see some easing by lending so that consumers can once again re-enter the market. And let's face it, if you have ever owned your own home, it is not likely you enjoy renting. But what about... the dreaded...
Credit is still a consideration, that is true. The main question being, besides your current credit score of course, has your credit recovered from the time of the foreclosure?
Many people make the mistake of not opening any new credit once the worst of their financial situation has passed. What lending does want to see is that you have been able to re-establish credit and use it responsibly. This doesn't mean that you have to have opened six or eight credit card accounts. A couple - - maybe three that have been opened for 12 months or more is ideal. A couple of years ago that was a requirement along with a mid credit score of 640. That is no longer the case if you are willing to use FHA or USDA or even VA to purchase your home. Conventional lending still requires significantly higher scores unless you have a large down payment-in which case you can find lenders who will go down to a 620 score. With government loans more than a few lenders are now accepting scores down to 580. However, judgments must be paid. Collections and charge-offs incurred in the previous 12 months are frowned up-but old ones may be overlooked.
The moral to all this is that it is time to come out of the shadows. It is quite possible that you are in a position to obtain mortgage financing again. I would suggest however, that you obtain your pre-approval from a broker such as Tippecanoe Mortgage. A mortgage broker will have more lenders at their disposal with varying guidelines for the loans than a bank. If you should go to your bank and get turned down, don't take "NO" for an answer. Visit your local broker to see if they have a lender that might be able to meet your needs.
Home ownership is down. Owning a home has always been one of the hallmarks of the American Dream. Get back on that horse and get going!
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