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Posted April 11th, 2012 under Upside Down House Options

Short Sale vs. Foreclosure: When Can I Buy a Home Again?

Tags: foreclosure credit, underwater mortgage help, short sale vs. foreclosure

Short Sale vs. Foreclosure: When Can I Buy a Home Again?

Homeowners who need underwater mortgage help and are considering short sale vs. foreclosure all tend to have the same question: Will I ever be able to buy a home again?

While everyone's situation is different, selling your home in a short sale or going through a foreclosure won't shut you out of the real estate market forever. That's a relief to many homeowners, who are trapped by an underwater mortgage but fear they'll never be able to own a home again if they sell it in a short sale or the bank forecloses.

So, we've established that you'll probably be able to buy a home after a short sale or foreclosure. Now the question becomes, "How long do I have to wait before buying another home?" Again, there are no hard-and-fast answers to that question, but a good rule of thumb is that you'll have to wait about three years to buy again after a short sale, and five to seven years after a foreclosure. Credit scores, which fall after foreclosures and short sales, are the big reason for those waiting periods.

What do credit scores have to do with when you’ll be able to buy a home again? Basically, if you go through a short sale or foreclosure, credit ratings agencies are going to note that on your credit report. Those negative events cause your score to fall, which can make it difficult (and in some cases impossible) to qualify for another mortgage. However, after a few years, most people are able to repair their credit and again qualify for a mortgage. But if you're eager to buy another home, the typical waiting period is something to consider when you're thinking about a short sale vs. foreclosure.

Of course, you may not want to wait three to seven years to buy another home. If that's the case, there may be a quicker path to home ownership for you. Some companies have recognized that many people are underwater on their mortgages through no fault of their own. Though these individuals may have sold their homes in a short sale, they may still be good candidates for mortgages (albeit at a higher interest rate). If you have otherwise good credit and meet other qualifications (like income requirements), you may be able to work with one of these companies to get into a new home soon after your short sale.

That's good news for people in a state like Arizona, where roughly 50% of homeowners are underwater. Of course, obtaining another mortgage right after a short sale may not be a smart choice for you. Some people may simply need to wait a few years before they get back into the housing market. It all depends on your situation. It's one of the things you'll have to evaluate when you're seeking underwater mortgage help.

Our Homeowner 101 Assessment and Action Plan is one of the resources you can turn to when considering your underwater mortgage options. We'll help you evaluate all your different options, so that you can get the answers and information you need to make a decision about your underwater mortgage.