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Guidelines for Buying after a Foreclosure, Short Sale, or Bankruptcy

Last week, Freddie Mac’s weekly survey put the national average of the 30-year  fixed at its lowest level since February 6 (4.27%). Though there have been small fluctuations, rates have  changed very little over the past 10 months, and the 30-year fixed remains about 1.000% above the record lows set in late-2012. Rates will tick up as the Federal Reserve reduces its stimulus program.

As we wait for rates to move, we have shifted our focus to addressing issues that real buyers face in today’s housing market. This week, we take a look at buyers who want to borrow to buy a home after a recent negative credit event (foreclosure, short sale, or bankruptcy).  

The puncture of the housing bubble and the subsequent recession caused many owners to lose their homes to foreclosure, short sale, or bankruptcy. As of February 2014, CoreLogic estimated that 4.9 million foreclosures were completed since September of 2008, with the majority occurring between 2009 and 2011.

Through the first quarter of 2014, the housing market is well on its way through the recovery process. In San Luis Obispo County, prices have increased 31% since 2011 and in 2012 single-family residential sales had their best year since 2005. Distressed properties take up just 8% of all listings.

For buyers who recently lost their homes from foreclosure, short sale, bankruptcy, or deed in lieu, now is also the time to think about a fresh start. For many, that time can come a lot sooner than they may think.

“Most of the time, people have been told they have to wait seven years to buy a home after a major negative credit event,” said Jason Grote, co-owner of California-based mortgage lender Central Coast Lending.

“The reality is, people can buy a home a lot sooner than that. Sometimes in as little as one year.”

We have put together a guide below to help people have have recently had a foreclosure, short sale, bankruptcy, deed in lieu, or loan modification to figure out the timeline for when they are next able to purchase a home.


Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile