Life after Short Sale, One, Two, or Three Years Later

It appears that short sales may become more prevalent and desirable than having a foreclosure in one's credit history. So, how do folks who have sold their home via a short sale fare after the short sale? Because of the negative ding on their credit history, they wonder if a landlord will even rent to them. once that has been solved, their next question typically is, "How soon before we can buy a home again?" This article addresses specifically those concerns. You will be surprised at that amount of good news that exists for short sellers. Part of the good news is the short length of time that the negative credit impacts of the short sale cause a decrease in their credit score. The negative impacts of the short sale--that is, selling a home for less than the remaining mortgage--are less long lasting than those of a foreclosure. Today's lending world is inclined to assist the short seller in buying again as quickly as possible, especially if the credit ding is solely related to the mortgage(s) of the home they sold short. Finding a rental while repairing the credit after the short sale is rarely a problem with knowledgeable landlords. Most advice to the landlords is to look at the total credit picture, if the credit smudge is only from the mortgage(s) on their personal residence, it is likely that these post-homeowners will be excellent tenants. Usually these displaced homeowners, who have paid all their other bills in a timely manner, will be responsible tenants as they appreciate the new start and know the benefits of caring for a home. Those who have enjoyed the taste and benefits of owning a home recognize the integral part that home ownership plays in building long term financial security. Thus the most urgent question for short sellers is generally centered on how long it will be before they can again own a home. Steven Herndon American Pacific Mortgage points out that those who sold under short sales in 2008 to 2010 are now reentering the market and closing escrow on their new homes owing far less than on their previous home and with significantly lower payments. In some cases the home they are purchasing now is more substantial than the home they sold. How son can we buy again? Catherine Brunner of Community First Credit Union answers that her firm is writing new loans for those coming out of short sales in three years or less. There are circumstances in which she is able to obtain approval for the new loan within about one year of the short sale.

Steve and Catherine both stressed that the credit score recovery is very important. as a general rule you need a credit score of 640 and above to obtain a real estate loan. While it is not definitive how much the short sale initially affects the credit score(scoring agencies keep their formulas so secret that even wiki Leaks cannot find out their secret) Steve & Catherine have documented that within about a year or so of the completion of the short sale, the credit score can easily be 640 and well on its way into the 700's. with a credit score above 640 you can qualify for most real estate loans. They both agree that if the only negative mark on the credit is the late mortgage payments, the credit repairs much more quickly. this shows how important it is to keep all your other payments (car, credit, installment loans) in good standing and paid on time even while working through the short sale. Also do not close out your other sources of credit, just continue to pay them down and you will be pleasantly surprised at how well your credit fares through this whole process. Not all firms or mortgage brokers are experienced with handling new loans for short sellers who are now buying. In fact if you walk into one of the big box lenders, you are less likely to obtain the loan, and if you try to get the loan through an internet lending company you are almost certain to be denied. Conversely, if you work with small local lenders ( a credit union, local bank, or a local mortgage broker) the chances of success are greatly enhanced. Our rule is if you cannot walk into the office of the person who is working on your loan you are likely destined for a heartbreak or at the very least, a significant measure of frustration.

Original edit by Eileen O'Farrell Real Estate ViewsPress Democrat