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Buying a Home After a Short Sale or Foreclosure

July 29, 2013

Post-foreclosure purchaseIf you recently went through a short sale or foreclosure and are wondering when you should try to buy another home in Chicago, you are not alone. With the economy on the rebound, many Americans who experienced housing problems like a short sale or foreclosure during the recent economic downturn will soon be hitting the market, looking to buy another home. But how soon?

The answer will depend on the specific situation of the individual. When they will be able to secure financing depends on the details of their situation, but the following five variables must be taken into consideration and dealt with, according to a recent article on the Equifax Finance blog, “

Can I Buy a Home After a Short Sale or Foreclosure?

1. Duration of delinquency: Foreclosure proceedings and short sale transactions can take quite a bit of time (depending on the state in which you live and the banks’ procedures), and homeowners in foreclosure or short sale are often unable to continue making monthly mortgage payments during the process. The duration of this delinquency can do serious damage to credit, even before the final foreclosure judgment or short sale is reported.

2. Deficiency judgments: In a foreclosure or a short sale, there is often a large debt that is left unpaid that banks want to settle. Under certain circumstances, and in some states, this deficiency balance can be waived, but in others, it cannot.  This has a lasting negative impact on your credit and, thus, your ability to purchase a home in the future.

3. Low credit scores mean higher interest rates: If you have damaged credit and a low credit score, you will likely be charged a higher rate to borrow money. On a purchase as large as a home, high-interest, long-term debt can be very costly. It is worth taking the time you need to get your credit in order by making a good faith effort to pay all of your bills on time, clear any collections or judgments, and improve your credit score. This may mean waiting a bit longer before you buy another home but in the long run, it can save tens of thousands of dollars in interest over time.

4. A higher down payment: If you’ve had a housing-related credit issue previously, many banks and investors have guidelines in place that may require you to put more money down on your next home purchase. Some of these rules require down payments as high as 20 percent. This too means that you may have to wait longer to buy again.

5. A waiting period may apply: Many of the major investors and insurers of mortgages have issued new rules on how long you must wait after foreclosure, short sale, or deed in lieu before you can buy again. This can be up to seven years depending on the loan type.

The good news is that you will be able to buy again, with patience, saving and working to rebuild your credit. Get tips to improve your

credit scores, protect your identity, save money, plan for retirement and more on the Equifax Finance blog.

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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