Real Estate Blog

If you had a foreclosure or a short sale and are ready to venture into the real estate market again, you are probably wondering what it will take to make home ownership a reality.

We spoke with Jennifer Orner from Prime Lending again to get three tips for what buyers can do after they've been through foreclosure or a short-sale to become eligible for a home loan again.

1. Wait

After a foreclosure or a short sale, the waiting period to become eligible to apply for an FHA mortgage would be three years. The waiting period starts from the date that the foreclosure case was made final-usually the date of the foreclosure auction sale. However, if you want a conventional loan, you will have to wait seven years after a foreclosure and two years after a short sale and have at least a 20 percent down payment. If you have only a 10 percent down payment, you will have to wait four years after a short sale. There are exceptions to extenuating circumstances, however, they are very difficult to document and/or prove.

2. Reestablish your credit

"It's extremely important to re-establish [your] credit history after a foreclosure or short-sale. You can start by establishing an on-time rental history," Orner recommends. Some ways she recommends re-establishing your credit are:

• Making your full monthly payment around the same time every month by check, if possible, and keep copies of canceled checks to document that history.
• Continue to make any remaining credit card, car and installment loan payments on time every month. 
• If you have no other debt, or have it discharged in bankruptcy, consider opening two new small credit cards to use monthly.  Charge a small balance and pay it down or off every month to re-establish a consistent history of on time payments for at least 12 months. 
• Monitor bills closely to ensure that nothing becomes delinquent or goes to collection. 

"It is most important to the underwriters to see that although you may have had difficulty making your mortgage or other debt payments in the past, your recent credit history proves that you are stable now and able to pay your bills on time.

3. Show a pattern of savings

Even saving as little as $50-$100 per month and slowly building up a savings again will show lenders that you're creating a pattern of savings.

Remember, when buying after a foreclosure or short sale, you will need to meet the income and credit requirements for the loan in addition to the conditions as outlined above.