Approximately, five million Americans have lost their homes in foreclosure proceedings. An additional two and a quarter million families have sold their homes in short sales. Many of these homeowners who have previously lost their homes due to foreclosures are now returning to the marketplace. They are looking to reestablish the American dream of home ownership.
Foreclosures and Credit Scores
Homeowners who go through either a foreclosure or a short sale generally receive deductions of between 85 and 165 points on their credit score. Individuals who pay their other bills on time suffer less of a reduction of their credit scores. There are things that can be done to reestablish credit and raise credit scores.
Some financial institutions are more willing to work with prospective homeowners who have gone through foreclosures and/or short sales. FANNIE MAE and FREDDIE MAC require families who have defaulted on previous mortgages to wait five (5) years before they will give them a new mortgage. They also will require a minimum of a ten percent (10%) down payment on the purchase price and a credit score of approximately 700 before they will loan them money on a new mortgage. It should be noted foreclosure information is completely removed from credit reports after seven (7) years.
Extenuating Circumstances
If a previous mortgage defaulter can show there were extenuating circumstances which resulted in their home going in foreclosure FREDDIE MAC and FANNIE MAE will reduce the wait for them to obtain a new mortgage to three (3) years. Examples of extenuating circumstances are loss of employment, a divorce, a significant health issue or another significant onetime event in the individual’s life.
Conclusion
Even if you have lost your home in foreclosure you still may have the opportunity to buy a new home in the future.
