Average Time to Rebuild Credit to Purchase a Home

 • After a foreclosure: Five to seven years.

• After a foreclosure with extenuating circumstances such as disability, death of a spouse etc: Three to seven years.

• After a Dead in lieu of foreclosure: Four to seven years.

• After a Short Sale: Zero to two years.

Other Alternatives Of course, the above averages represent typical buying patterns for those using regular lenders to obtain a conventional loan or government backed loans; private investors are still viable options that enable many people to purchase another home immediately after any type of financial fiasco including foreclosure. However, rates tend to be less favorable and requirements more stringent than ever. Just a few years ago it was quite easy to obtain a sub-prime mortgage for a relatively low premium above the preferred status but today, much of that has changed. While it is still possible to obtain the equivalent of a sub-prime loan, be prepared to come up with a much larger down payment and higher overall rates.

Short Sales Win Hands Down Sellers wishing to minimize damage to their financial future clearly come out ahead when using a short sale but it’s still possible to further decrease the downside by avoiding a 60-day late payment, working closely with the lender to achieve a quick price agreement and setting aside as much funds as possible for a new loan. In fact, homeowners that maintain a solid payment history and work-out an agreeable short sale deal early may find it desirable to downsize to a new home by setting aside additional funds equal to 20% down. Without PMI and a reduced debt-to-income ratio, sellers are finding it possible to take advantage of lowered property values to immediately purchase another home for a fraction of the cost (and debt burden) owed on their prior home. It’s a win-win for all involved but only if you understand the benefits and work aggressively to seal the deal.