A lender I know recently told me how there is about to be a MASSIVE CHANGE in the timeline to get financing to buy a home AFTER you have a Short Sale, Foreclosure or a Bankruptcy.
In the past we borrowers had to wait 3-7 years to get new financing after defaulting on a home loan. Now that timeline is about to be shortened down to 12 MONTHS!
This new timeline will allow a whole sector of the market who has been forced to rent a home these past few years to be eligible to get a home loan, further fueling the housing market.
This announcement was shocking to hear, since all we have seen from the lending market these past five years is further tightening.
The shortened timeline to acquire financing after a foreclosure or bankruptcy is not without a condition however. The condition is that this only applies to borrowers who actually had a financial hardship that lead to the foreclosure, short sale, or bankruptcy.
You need to prove that prior to the default your income dropped by at least 20% for 6 months or more. Therefore, if you short sold a home because it lost so much value but not because you couldn’t make the mortgage payments then you have to wait along the standard timeline (for most people it’s 3-4 years). There are many questions to be answered with these new guidelines, such as does a medical hardship or divorce constitute a financial hardship? For those answers I will be leaning to the lender who first told me about this new program and who you should call to get more details about this major change in home loan financing:
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