How Soon Can I Buy Again After a Foreclosure or Short Sale?

So many of the calls I get today are from people who want to take advantage of this great real estate market.  Prices are low, interest rates are lower and everyone wants a great deal on a foreclosure or a short sale because they hear that they can get a steal.  There are two sides to every coin.  In order for someone to buy a foreclosure, someone has to lose their home.  

Lender guidelines are always changing.  Just after the 'meltdown' there was a severe knee-jerk reaction and lenders went from giving away money to anyone who could fog a mirror, to denying anyone with less than perfect credit.  Today things are starting to settle down and lenders are slowly releasing their grip making it easier for people to qualify for a loan. 

Life after foreclosure will basically mean that you will be renting for a while.  Lenders today have a 3 year waiting period from the date of your foreclosure to the purchase of your new home.  The only way to get around this is to pay cash which means you would not be borrowing money anyway.  This is frustrating for many people.  Since they have stopped paying their mortgage, most people have piled up some cash hoping to use it for the down payment on their next home only to find out that they cannot obtain a loan.

Short sales are considered foreclosures by the lenders so the same rules apply with one exception.  You can qualify for a loan 30 days after your short sale as long as you did not miss any payments on your home in the last 12 months.  Now the tricky part is getting a bank to approve your short sale when you have not missed a payment.  Most banks will tell you that they will not allow you to do a short sale or a loan modification because you are current on your mortgage.  So you ask them, "Should I stop paying?"  Then you get the answer, "I would never tell you to not pay your mortgage."  It's a trap really...

The bottom line is that it's not the end of the world if you lose your home.  It's just a house.  As long as you learn from the process and make better decisions it could be one of the best things to happen to you financially.  Running out and taking on another several hundred thousand dollars in debt is not the best way to recover.