Thanks for all the good feedback! Is there a way to save my credit and purchase a less expensive home?

Asked by Jackie Walker, Cordova, TN Sat Jan 8, 2011

I am really, really appreciative! My house was listed. Modification was denied because I'm employed now and payments are current. I'm retiring due to health of parents. Father had a stroke. Was hoping not to ruin my credit at my age and to take advantage of one of the federal modification programs. If I received a satisfactory modification, I would remain in my home. In my area, I believe it would be 8-10 years before the market returns.

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Bob Movin-On, , Hartford, CT
Tue Jan 11, 2011
Here is are the ramifications if anything other than a modification accrues, not to say modification does not ding your credit, it does just not as bad.

Ramifications of Foreclosure, Short Sale or Deed-in-lieu-of Foreclosure

Here are some of the ramifications of foreclosure, short sale or deed-in-lieu-of-foreclosure, there are many more like; insurance rates, your job (yes employers are checking credit records these days).

Your credit score will be reduced by 200-400 points, short sale and deed-in-lieu-of a little less 100-200 points.

All forms of foreclosure stay on your credit report for 10 years.

After you have gone through foreclosure, short sale or deed-in-lieu-of-foreclosure there will be what is known as the "waiting period", this period of time varies for each and can be reduced if you had some type of extenuating circumstances that caused the foreclosure:
Waiting Periods to Buy After Foreclosure – “YES” Short Sale and Deed-in-lieu-of are forms of foreclosure
• Buying after a Walk Away Foreclosure
The waiting period is 7 years
• Buying after a Foreclosure
The waiting period is 5 years with 20% deposit up to 7 years.
• Buying after a Foreclosure with Extenuating Circumstances
The waiting period is 3 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.
• Buying after a Short Sale
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Short Sale with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.

In addition to the waiting period and minimum down payment, you will be required to have a minimum FICO score and the home purchase must also be the principal place of residence, not a rental nor a vacation home.

Lastly, most loan applications will ask the dreaded question "Have you ever been foreclosed on?" this stays with you for life, many think that because it will not show up on the credit report after 10 years they can answer "no", well lying on a loan application is a felony that carries a major jail term, so be aware.

Bob Patrick
Buy a home after foreclosure, short sale or deed-in-lieu-of expert
Movin-On LLC
Helping families/people that have lost their homes get back into a new one in as little as 6 months
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Joanna Morris, Agent, Floral City, FL
Sun Jan 9, 2011

You have to be qualified for a short sale. Buying a new home when you are already having difficulty may not be the correct advice. Banks are more willing to do a short sale on your primary home and forgive the deficit than if it is a second home. Approach the bank with hardship of having to take care of your parents and see if that qualifies you for a short sale. Investigate thoroughly your options before making a decision and make sure this is the right thing for you. Sometimes we get caught in the emotion of things and do not make the right decisions.
0 votes
Eli Givoni-S…, , Boca Raton, FL
Sat Jan 8, 2011
Yes. You should purchase the new home first, if you can get a loan. Then short sale the house you are living in. Your credit will take a hit, but it will bounce back rather quickly.

Usually, after a short sale, a person can buy a new house in two years. So, if you can't afford to buy now, you should sell the house you are living in, and move into a rental. Time is on your side. The market is still declining. So, after renting inexpensively for two years, you can use the money you saved to buy a less expensive home. I know it sounds inconvenient to move twice, but it will be a great way to get out from under your debt and get a fresh start.

Several of our past short sale clients look to buy new property two years after their closing. They have saved money, got a better job and have their life in order. They tell us that the short sale was the best thing they ever did.

Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states
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