Will a Past Foreclosure Prevent Buying a Livermore Valley Home?

With home values rising and monthly rents becoming costly, there are plenty of former homeowners wishing to re-enter the Livermore Valley real estate market. For some, the mortgage hurdle is complicated by a prior foreclosure, personal bankruptcy or a short sale on their credit history.  If you’ve experienced one of these events, what does it mean for your home buying prospects?

Simply put, you’ll need to wait awhile, but the time period may be shorter than you realize. The Wall Street Journal reports that over 700,000 former homeowners are now eligible to return to the market, despite previous foreclosure or adverse record. Here’s a framework for example:

Chapter 13 bankruptcy: no matter the type of mortgage you had before, you could be eligible for a new FHA mortgage in 1 to 2 years. You will need to have clean credit, a good income, and meet a minimum down payment of 3.5%.

Prior foreclosure or short sale on an FHA-backed mortgage:  you will need to wait at least 3 years before being eligible for another FHA loan. Good credit and a consistent work history will be essential.

If you had a mortgage previously backed by Freddie Mac or Fannie Mae, and experienced a short sale or foreclosure, you may need to wait to 7 years before you are found eligible for another such mortgage.

Loan modifications: if your lender agreed to alter the terms of  your prior mortgage, either temporarily or permanently, this could impact your credit score. How much of an impact depends on how the lender reported it – if at all – and how your loan performed after the modification.  There is no typical waiting period in this case, save for the length of time it may take for your credit score to recover.

In all cases, remember that banks are cautious today. You can expect some extra scrutiny if your prior mortgage did not show “paid as agreed” for any reason. The good news is, the stigma of a  prior foreclosure, bankruptcy or short sale is  temporary. Your best bet is to talk to a reputable mortgage lender, and see how your own situation fits in with the current underwriting guidelines. I can refer you to local lenders who are experienced and trustworthy. You may be able to buy a Livermore Valley home sooner than you think!

When you have questions about the Livermore Valley real estate market, contact me! I have the local market expertise you can count on for Livermore, Pleasanton and Dublin! Whether you are buying or selling a home, or “just looking“, I can provide the latest market data and the professional guidance you need.

John Kurtzer
Your Livermore Real Estate Expert
RE/MAX Accord

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