I lost my home due to foreclosure or short sale. When can I buy it again?

You may very well be one of the millions of Americans who lost their home to a foreclosure or short sale. Fannie Mae and Freddie Mac, which control most of the mortgages in the United States, realize that restricting buyers from buying homes in the future is not a good economic decision.

Until recently, Fannie Mae and Freddie Mac had a five-year waiting period before a previously foreclosed borrower could finance a mortgage on a new home. The time frame for an FHA Loan is three years and two years for a VA Loan.

Fannie Mae and Freddie Mac changed their policy and reduced the waiting period to two years for those homeowners who previously experienced a deed-in-lieu of foreclosure. The new loan must be an 80% loan-to-value ratio. This means that the borrower will need to have a 20% down payment on a new home. After four years, the maximum LTV jumps to 90%, so the borrower will only need a 10% down payment. These new waiting periods and down payment requirements also apply to short sales and prior foreclosures.

A borrower may make a 10% down payment after a two-year period under extenuating circumstances. Some of these circumstances may include job loss or a health condition that appeared to be the primary cause of the initial mortgage default.

In all cases, the borrower must reestablish their credit and meet minimum credit score requirements. From the time of foreclosure or short sale, it is extremely important to pay your bills on time and pay off your debts to re-establish good credit. Currently, his credit score must be at least in the 680 range. Foreclosure and short sale will remain a derogatory mark on his credit for seven years.

The FHA and VA time period requirements are three years and two years, respectively. Maintaining a positive credit history from the time of the setback is essential.

Borrowers who do not qualify for this program are those with mortgages on second homes and investment properties. Anyone who has obtained a home equity line of credit (HELOC), or has obtained a second mortgage and withdrew the cash, will not qualify for the shorter waiting period.

Keep in mind that if you are paying cash for a house, your mortgage history and credit score are not important. An all-cash transaction will allow the buyer to purchase a home at any time in the future.

These new guidelines are in their early stages, so it will be interesting to see how banks and lenders react to borrowers who defaulted and lost their homes due to foreclosure or short sale. These new regulations always look encouraging “on paper.” We will have to wait and see if this is a step in the right direction for the housing economy.