Credit Repair after Short Sale and Foreclosures, What Lenders Look For

Among homebuyers actively looking to make a purchase, are an increased number of purchasers that have experienced a past short sale or foreclosure. Targeting these buyers are credit repair companies and law firms that claim & often succeed in removing a short sale or foreclosures for a fee. A clear credit report is only a part of the financing requirement. Buyers must state on their loan application under Federal Fraud statutes, if they have had a foreclosure or previously owned a property. Having a short sale or foreclosure is a loan eligibility issue, so lenders must document this event in the loan file. Since loans are now reviewed after closing by the investors, if it is discovered the information in the file is incorrect, the investor can require the lender to repurchase the loan. As a result, the lender must be thorough and accurate in their processing of the loan.

Here are some reminders of typical wait times:

Waiting time after a foreclosure:

VA: 2 years

FHA: 3 years /1 year Extenuating Circumstances

Conventional: 7 years

After a short sale:

VA: 2 years

FHA: 3 years / 1 Year Extenuating Circumstances

Conventional: 4 years / 2 Years Extenuating Circumstances

Bottom line; if there was a previous short sale or foreclosure in the history of a

new buyer, providing accurate information to the lender up front will help avoid a

surprise or disappointment later.