News for Homeowners Who Lost Their Home During the Recession

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Filed under: Qualifying for a Mortgage Loan

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During the terrible housing recession, many homeowners lost their home for a variety of reasons. Even though this may have negatively impacted homeowners’ opinions on homeownership, the ability to qualify for another mortgage may not be as difficult as it once was.

In the past, a bankruptcy or foreclosure usually meant that the possibility of owning another house could not happen for seven years. Now, however, the rules say that a homeowner needs to wait only three years, and, depending on the reason a homeowner lost his or her house, the wait may be even shorter.

According to Lew Sichelman, a homeowner can now qualify for a mortgage as soon as 24 months after losing his or her home if their issues were the result of “extenuating circumstances” over which the homeowner had no control.

Matt Kovach, a product development manager says these “life-changing events that made it impossible” for the homeowner to make his or her house payment include job loss, serious illness, and/or the death of a wage earner. But even if the homeowner suffered through one of these, automatic qualification still will not occur until the homeowner demonstrates that he or she can handle credit and afford the payments.

Kovach adds that the homeowner needs “an extremely clean credit history after a significant derogatory event” and that “poor credit is not a good indication you’ve learned from your mistakes.”

The Federal Housing Administration says that a waiting period of one year exists if the homeowner filed for Chapter 13 bankruptcy and two or less years if Chapter 7 was filed. If a homeowner went through a short sale or foreclosure, the wait is three years, but shorter if there are documented extenuating circumstances.

For Fannie Mae or Freddie Mac loans, the waiting is tiered. If a homeowner suffered a “life event” the homeowner must re-establish credit for 24 months after a short sale and if there are no extenuating circumstances, that time period increases to 48 months.

According to Freddie Mac guidelines, if the borrower’s financial issues were due to his or her mismanagement, an acceptable credit reputation must be re-established for at least 84 months if the home was foreclosed on. In addition, there is a 60 month period if the homeowner filed more than one bankruptcy petition in the past seven years, a 48 month period after the discharge or dismissal of a Chapter 7 bankruptcy, and a 48 month period after conveyance of a deed in lieu of foreclosure or short sale.

If you were involved in the housing recession and lost your home, but are interested in seeing where you stand in buying a home again, please feel free to call me to talk about this information.

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