A commonly asked question from buyers inquiring about one of our listed properties often comes around to time. After spending a few minutes talking about a property the conversation turns to the buyer and why they are looking. Anymore, it’s not unusual to hear “I have recently gone through a (multiple choice) bankruptcy, foreclosure, short sale. Do you know if the owner will finance my purchase or how long it will be before I can get a mortgage?”
Well, in general the owners do not offer financing so that is out of the question. There is a wait after any of these events and it’s not simple to identify. Credit worthiness begins and ends with a borrower’s credit score. The single event with their home loss will affect their score but it’s only one part of the calculation. Other debts will also play into the score and how fast it can be improved to a level where a mortgage can be obtained. This is particularly true with short sales. With a foreclosure about the fastest one can hope to get back into the game is three years. More likely four to five.
I found an interesting article that verifies these time lines in the New York Times. The volumes of people making these decisions regarding their mortgages and homes often seem to be mis-informed on these time lines. We often are the bearer of bad news as to how long the wait will be. It’s also why we see more and more renters and rent to own requests. Over the next few years I believe we will see home ownership rates hit 20 year lows, and renter percentages hit similar highs. Far too many people are making these significant decisions lacking a full understanding of how long they will wait to own another home.