Tips to Bounce Back After a Foreclosure or Short Sale

The recession that began in 2007 affected millions of Americans, and some are still recovering. Millions of homes were foreclosed, short sold, and straight up abandoned. Hope seemed lost for many, but it takes grit and determination to pick your life back up again.

As the economy slowly recovers, interest rates drop, and rents rise, some will be able to jump back into the market. For those of you who were burned by the market last time, here are five tips to jump back in:

Know your options

Waiting those long seven years after filing bankruptcy or settling a foreclosure is no longer required. Fannie Mae so graciously shortened the period to two years wait for homeowners who had justifying circumstances as prolonged income loss, or major medical expenses. She also gave three years after a foreclosure. This is way down from the four to seven it once was.

In order to get a Federal Housing Administration loan after a foreclosure, you must now wait three years, and maybe one with extenuating circumstances.

Stop being bad with money

This one is about self-control. You need to put your energy into eliminating your debt, building your wealth, and break your needless spending habits. Homebuyer’s biggest task is to save for closing costs. Pile up your cash from bonuses, odd jobs, tax refunds, and any extra money you can get your hands on. Set up automatic deposit to your savings account is a great way to grow your down payment funds, and don’t spend it!

Repair your credit

The FHA has a minimum credit score of 580 for maximum financing. There are lenders who loan the minimum, but other lenders require a FICO score of 640 and up. To build your credit score you must pay your bills on time, not take out new loans, and don’t run up your credit card bills. You can also request your landlord and utility company to report your on-time monthly payments to major credit bureaus to have those reflected on your report.

Watch out for predatory lenders

You should run the other way if lenders are offering your “special” zero-down home loans, rent-to-own contract agreements, or any other too good to be true sales pitch. Predatory lenders often go after minorities. If you aren’t sure of the rules and conditions of a contract, don’t put your name on it. Have legal counsel look over the contract and explain it clearly to you before you sign.

Get help

Housing counselors can help clear up any gray areas for you, but they can also help you set up a financial plan. They can also get in touch with your state, local, and private resources that can make it easier for you to finally own a home again.

Before you begin, find a HUD-approved counselor. Find the person who is genuine and is there to help. Do your homework, and stay true to your plan. If you do all this, you will be a home owner once again.

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