Foreclosed Home Owners may get “Second Chance”

The Federal Housing Administration is giving some former home owners another shot at home ownership. The FHA sent a letter to mortgage lenders stating that it would offer mortgage insurance to borrowers who once filed for bankruptcy, or who lost their homes through foreclosure or short sale during the recession.

Still, potential borrowers must show they can meet all other FHA requirements and that they are no longer financially constrained. Borrowers also will have to undergo housing counseling and FHA is requiring lenders to verify that at least a year has passed since the foreclosure or “economic event” that caused the foreclosure or bankruptcy.

“FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage,” according to the letter FHA sent to lenders.

Source: “FHA offers mortgage backing to the once bankrupt,” HousingWire (8/16/2013)

Former Home Owners may get a “Second Chance”

Here is our  update information to share with you! Are you now starting to ask: When can we buy again? Were you foreclosed on or did a short sale due to circumstances like a job loss or illness? The wait may not be as long as they were once told! 

Many banks have guidelines that prevent them from issuing loans to people with a foreclosure or short sale in their credit history in some cases for as much as seven years. That also doesn’t factor in the damage foreclosures and short sales can do to a person’s credit score, and the work former home owners’ will need to do to repair it so they’ll have a better chance at qualifying for financing again in the future. Please contact a local lender that knows the new regulations and is recommended by your Realtor!  

The wait-time varies among lenders and government entities. For example, the Federal Housing Administration says former home owners with a foreclosure must wait three years before they can qualify, while Fannie Mae and Freddie Mac require a seven-year wait following a foreclosure. So clearify this with those helping you.  

As for short sales, sometimes these waits can be waived or drastically cut, depending on the borrower’s situation. FHA requires a three-year wait following a short sale, but it may waive that wait if the short sale was due to a job loss. 

Also, for borrowers who can come up with a higher down payment on their next home purchase, they may also not have as long to wait. For example, Fannie Mae will reduce the wait from seven years to two years for borrowers who come with a down payment of 20 percent or more. 

Source: “Lost Home to Foreclosure but Ready to Buy Again? Prepare to Wait in Lender ‘Penalty Box,’” Associated Press (Feb. 22, 2012)

Rental History: More Important in Getting a Mortgage?

Borrowers who have a history of paying rent on time may see a boost to their credit score.

Experian, a leading credit report company, added a section to its credit reports last year that reflected on-time rent payments, which helped give a boost in the credit scores to some on-time rent payers. Now the two other major credit reporting companies are following suit. 

recently announced they are also adding a score that reflects payment histories from landlords, The New York Times reports.

“Evidence of positive rental payments could be a plus for consumers,”  Joanne Gaskin, FICO’s director of product management global scoring, told The New York Times. 

Nearly half of high-risk consumers saw an increase of 100 points or more after their rental history was added to their credit report, says Brannan Johnston, the managing director of Experian’s rent bureau. Consumers with average or higher credit scores, on the other hand, did not see any major difference to their scores. 

For former home owners who lost their homes to foreclosure, they may be able to rebuild their credit histories more quickly now by showing they are “very responsible renters,” Tim Grace, senior vice president of CoreLogic, told The New York Times. 

Full article at source: “A Good Rental History Can Help Borrowers,” The New York Times (1/ 5/12), other news from Placerville, El Dorado County, CA. at: www.sierraproperties.com