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Author: dashrf Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127237  
Subject: Buying after a Short Sale Date: 4/25/2010 1:27 PM
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I'm interested in learning whether or not it's possible to buy a home soon after going through a short sale.

Here are some particulars to my situation:

I was working as a programmer, making a good salary. I purchased a house for about $250k, and the payment was (barely) within my means. Then, the local economy imploded (a bit worse than everywhere else, from what I've read), and my employer shipped just about every job but the CEO's over to Singapore. I was laid off with zero prospect of finding a similar job locally, but due to family reasons, didn't want to leave the area.

So I rebooted, and became a teacher. It's a good job, and relatively stable, but the pay is less than half of what I made before. I immediately listed the house for sale, but it sat on the market for three years as values (and our asking price) dropped further and further. I burned through my e-fund trying to keep the payments current until it sold, but finally I was tapped out.

Fast-forward to today. I haven't made a payment in over a year. The house is listed as a short sale and the bank has accepted an offer, due to close in June. For better or worse, I'll finally be out from under the mortgage.

Although I stopped making my mortgage payment, I was careful to keep everything else current. Cut expenses, whatever was necessary. No other debt of any kind. Aside from the mortgage, my credit report is spotless.

There are a few houses for sale near my school, in the $50k - $60k range. This is substantially less than my old house, and the payments should be within my means.

But is there any way I could get into a house after going through a year of delinquency and a short sale? Is a cosigner a possibility? One of the available houses is a distressed property -- is there anything available for buying and restoring a property like that?

-rf
first post in four years -- what'd i miss?
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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117262 of 127237
Subject: Re: Buying after a Short Sale Date: 4/25/2010 2:59 PM
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But is there any way I could get into a house after going through a year of delinquency and a short sale?

Rent.

Seriously - have you checked your credit score? With no payments for a year on your mortgage (i.e. a 30, 60, 90, 120, 150 and 7 180 day late marks on your record) your credit score is probably WAY below where it would need to be to qualify for a mortgage, no matter how good the rest of your credit report is. Additionally, when the short sale is recorded, it will likely be reported as "settled", rather than "paid in full". It usually takes 2 years after a mark like that to qualify again.

Is a cosigner a possibility?

Sure, if you can find someone silly enough to do so. They would be much better off buying the home themselves, renting it to you for a few years for enough to cover the costs, and then letting you buy the home from them once you qualify for a mortgage again.

AJ

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Author: dashrf Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117263 of 127237
Subject: Re: Buying after a Short Sale Date: 4/25/2010 4:12 PM
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Is a cosigner a possibility?

Sure, if you can find someone silly enough to do so. They would be much better off buying the home themselves, renting it to you for a few years for enough to cover the costs, and then letting you buy the home from them once you qualify for a mortgage again.


Do you mean "better off" from a strictly financial standpoint, or a risk-management one? If it's financial, what difference does it make? Would having us both on the loan affect the interest rates obtainable?

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117264 of 127237
Subject: Re: Buying after a Short Sale Date: 4/25/2010 4:49 PM
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Do you mean "better off" from a strictly financial standpoint, or a risk-management one?

Risk management. Someone who co-signs a loan is legally just as liable for the payment of the loan as the main borrower, but without any of the potential upside. Because of the legal liability, and in order to protect their own credit history, any co-signer must be ready, willing and able to make the required payments on a loan that they co-sign on. Therefore, if they are going to do that - they would be better off from a risk management standpoint if they were to get the loan in their own name. (Note: this is true for any type of co-signed loan, not just a mortgage.)

Additionally, if the co-signer should happen to need to borrow money (like to buy a different home, or a car), a co-signed loan will count against them in their debt to income ratios, without any offsetting income. In comparison, a home that is owned and rented out has the rent to help offset the required debt payment. For a shorter term loan, like a car loan or a personal loan, that might be less of a risk, but for a mortgage that has a 30 year term, unless the co-signer is independently wealthy enough to be confident that they will have no need to borrow money for the next 30 years, that's a very long term risk to take on.

AJ

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117265 of 127237
Subject: Re: Buying after a Short Sale Date: 4/25/2010 6:20 PM
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<<first post in four years -- what'd i miss? >>



Bush is bad.

Obama is worse.

Republicans ran up deficits that are too big.

Democrats are running up deficits that are even bigger.


etc. etc

Yada yada yada.


Oh, you mean on THIS board?




Seattle Pioneer

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117342 of 127237
Subject: Re: Buying after a Short Sale Date: 5/5/2010 7:46 AM
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s a cosigner a possibility?

Sure, if you can find someone silly enough to do so. They would be much better off buying the home themselves, renting it to you for a few years for enough to cover the costs, and then letting you buy the home from them once you qualify for a mortgage again.


Do you mean "better off" from a strictly financial standpoint, or a risk-management one? If it's financial, what difference does it make? >/i>
The cosigner would be better off because he'd own the house himself instead of co-owning it with someone with a bad credit record.

Would having us both on the loan affect the interest rates obtainable?
Your bad credit hurts more than his good credit helps.

Your bad credit means that they'll charge a high rate----assuming that they'll make a loan at all. The bad credit poisons the well.
His good credit will incentivize them to make the loan----because they'll have somebody to go after if you default.


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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117343 of 127237
Subject: Re: Buying after a Short Sale Date: 5/5/2010 10:38 AM
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<<I'm interested in learning whether or not it's possible to buy a home soon after going through a short sale.

Here are some particulars to my situation:

I was working as a programmer, making a good salary. I purchased a house for about $250k, and the payment was (barely) within my means. Then, the local economy imploded (a bit worse than everywhere else, from what I've read), and my employer shipped just about every job but the CEO's over to Singapore. I was laid off with zero prospect of finding a similar job locally, but due to family reasons, didn't want to leave the area.>>



Just out of curiosity, what happens if you buy another house you think is a good deal, and budget shortfalls require your school district to lay off new teachers ---- new ones in particular.

Wouldn't you be setting yourself and the person co signing for the loan for a repeat of your original problem?



Seattle Pioneer

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