Almost five million borrowers lost their homes to foreclosure and more than two million
gave their homes up to short sales. This loss equates to roughly 25-35 million people
who are looking for another place to live. That’s great for the rental market – but what
about those who want another chance of owning their own home?
Many borrowers defaulted on their loans due to unforeseen medical bills, unemployment,
layoffs, divorces, death of a spouse and other extenuating circumstances. These are
referred to as one-time events. There were predatory loans made by sales people,
experienced in ‘closing a sale’ making promises that would never be kept. Unsuspecting
borrowers signed – not understanding the fine print and believing what was told to them.
Other borrowers did nothing wrong but fell through the cracks by having their payments
misapplied, while the lender packed on late/miscellaneous/attorneys’ fees. Loans were
sold and resold without proper paper trail and documentation. The list goes on for these
one-time events (job transfers or relocation do not qualify as a one-time event).
Wronged borrowers are beginning to receive ‘relief’ from the failed Independent
Foreclosure Review (IFR). But the majority of wronged borrowers (who are told they
can file suit themselves for the wrong done to them) are only receiving checks for $500.
on average. That’s hardly the cost of trying to recover from a system gone wrong. What
happens to all these people?
While the housing market is trying to recover and interest rates are down, people who
lost their homes would like the opportunity to buy again. Some want to buy for obvious
tax reasons, others have regained employment and want to start building equity while
housing prices are lower. Still others say they’ve learned their lesson from overbuying,
overspending and over-borrowing and want another chance. Monthly payments today are
generally half what they were 6-8 years ago making it easier to repay loans.
There are different dates and times a borrower may again buy a home, but it is possible.
Key to buying again is re-establishing your credit and there are many ways to fix your
credit score. Obtaining a secure credit card, making purchases and paying them off on
time can help your credit score. If you lost your job and are gainfully employed again is
another important factor. Lenders want to see you have the ability to repay your loan.
Generally, there is a seven-year wait to buy a home again, however that time can be
reduced to two or three years or even less.
Loans backed by the Veteran’s Administration (VA) can be obtained in just two years
after a foreclosure.
Federally-chartered Fannie Mae and Freddie Mac normally have a seven-year wait period
before another loan is given. Under new rules enacted in 2010, that wait period can be
reduced to a two-year wait period but requires a credit score of 680 and a 20% down
payment (10% if there’s extenuating circumstances). If the would-be borrower doesn’t
have the down payment, their wait can be as little as four years to secure a loan with a
smaller down payment (10%) or no down payment under certain circumstances.
The Federal Housing Administration (FHA) will issue an FHA-insured loan three years
after a foreclosure (or short sale). FHA is more lenient in wanting a credit score of 620.
If the borrower can show documented proof of extenuating circumstances as to why they
foreclosed or had to short sale their home, the wait can be shorter and the down payment
There are private lenders who will loan money immediately, but they require larger down
payments and higher interest rates and fees. Caution is warned, but if a private lender is
your only option, make sure you can opt out after a short period (like 2-3 years) to be
able to refinance at a lower rate.
As in all these cases, it’s recommended you hire an attorney to go over that fine print
and assist you in re-establishing your credit. You don’t want to find yourself in the same
Keith A. Gantenbein, Jr. is a Colorado consumer advocate attorney, foreclosure defense and real
estate attorney located in Denver and servicing all of Colorado. His foreclosure defense practice includes
foreclosure prevention, foreclosure assistance, loan modifications, short sales, and all other foreclosure
defense legal assistance. He also handles bankruptcies, mortgage negotiations, lender liability, real estate,
civil litigation, debt defense, debt harassment, contracts and landlord/tenant. If you think you will be
facing debt collection, foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure,
contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your
situation and go over all your options with you.