March 5, 2013

Five Things to Know When Buying A Home After A Short Sale

I started writing this post back in Sept. 2012, it's taken me this long to complete it and hit publish. Mostly because the home buying process took a lot longer than expected and I really wanted to give you the best possible picture of what it has been like before sharing my thoughts with you. As there were many things we found out after starting this process that we didn't know about.

So here goes, a post 6 months in the making. My prayer is that it's helpful and saves even 1 family from dreading this process and finding joy instead.

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If you've been reading for a while now then you already know that three years ago we sold our first home in Minnesota as a short sale. Due to my job lay off in October 2008 we put our home on the market in April 2009. This was such a hard decision for us to come to, being our first home there were so many memories attached to it. Such a feeling of defeat when I lost my job and we knew that was going to effect our home situation greatly. After months of night being able to find work myself we finally made the decision to put it on the market.

We listed it in April '09 but it didn't finally sell until November of 2009. Luckily we had a great realtor working with us who made this process easy and helped us a lot during this time. He really helped to guide us through the process.

What made the process especially hard was feeling failure and defeat. We bought our home right before the market crashed. We got in right before, had a great rate and had no clue the events that would happen with my job. It was hard feeling like we "did everything right" and still finding ourselves in a position to not be able to pay our mortgage. We were skipping out on it and just refusing to pay even though we could. Getting laid off and then not being able to find steady work afterwards made it even harder to keep paying our mortgage. We knew something had to change. It was a hard decision to come to but after prayer and consideration listing the home as a short sale was our decision.

I wanted to share this process with you all because I know there are several of you that have gone through the same thing. During the last three years God has made my heart so sensitive and open to those who faced the same thing my family and I did. It can be such a painful and shameful thing to go through, but today I wanted to offer hope and tell you that there's always a light at the end of the tunnel.

After three years we have now found ourselves in a position to be home owners again. It's an exciting time for our family. These last three years have been filled with so much, we've learned and grown a lot and today I wanted to share with you Five Things to Know When Buying A Home After a Short Sale. 

Please keep in mind that I am not a professional, I'm just a wife and mom sharing with you what we've learned through the help of professionals we trust, this is just my own experience and encouragement. I urge you to consult the help of professional Realtors, brokers and financial planners that you trust as well. Also, if you faced foreclosure some of these may or may not apply to you, again consult a professional about those logistics.

1. Know that there's going to be a waiting period. 
I think this is probably one of the most important things to know, that's why I'm going to talk about it first. The reality is that after you face short sale or foreclosure you can not turn around and buy another home anytime soon. It's best to know this going into it, and wrap your mind around this fact now instead of later finding out and being discourages. Typically with short sales history you can not buy another home till 3 years after you short sale is final. We've been waiting three years to finally be in a place where we can buy and it's been some of the hardest three years, filled with transition and lots of waiting. Going into it buying a home any time in the next year was far from our minds. Honestly we were still healing from our loss, and there were lots of emotional things that needed to be dealt with to even begin thinking about buying  a home again. During this time since we knew there would be a waiting period we took that time to just wait and trust in the Lord that he had a plan. And even though we were in this not so great situation and time of transition we made the most of it and waited. I encourage you to do the same, this brought us a lot of peace during that waiting time.

Here's the most practical thing to know, you're waiting period begins three years from when your insurance claim was paid, not the actual sale of your home. This was a big one for us, as we didn't know this going into it. We thought it was three years after the sale, in our case our short sale happened in November 2009 but our insurance claim wasn't paid by HUD until January 2010. Making it three years from that date, which would be January 2013.

We ended up having to wait till then to purchase our home. This is known as "caivers." The best way for your find out when your caivers were paid is to call the National HUD office in Oklahoma City, OK and ask them. They will ask you for your SSN and address info of your short sale so have that info handy. And tell them that you want to know when your caivers were paid and that you're trying to buy a home after short sale/forclosure (which ever your situation may be)

2. Know that having a short sale/foreclosure on your credit history wrecks it.
Anytime you go through something like this your credit is going to be tainted, ruined and will probably have to be re built. Foreclosures stay on your credit history for 7 years. At the time of we didn't care much since we knew we were going to have to wait anyway, and credit problems were far from our minds. About a year before our waiting period was up we met with a broker to help us gain a credit history. Since we didn't have a credit card or any "revolving" debt we needed to speak with someone who was knowledgeable in this are to help us re build our credit. He offered tips and suggestions to help us get started and get our credit back on track where it needed to be in order to finance a loan for the purchase of a home.

3. Know that you're going to have to save money.
Buying a home always requires money. But, buying a home after a short sale requires even more. When we bought our first home we bought at zero down besides our earnest money. So this time around thinking about buying after a short sale we knew after meeting with our broker that we were probably going to be doing FHA financing which requires a minimum of 3.5% down. Plus, you may want to consider and plan for the fact that you may or may not have to contribute to your closing costs which is another 3-4%. Another thing to consider depending on the area and what the market is like where you live you might have to replace appliances right away or do other improvements right away to make the home livable. So, the more you can save the better in this case.

4. Know that you NEED to do your Homework & Ask A lot of Questions.
Buying a home requires a lot of information I have learned. There's tons of forms to gather, paperwork to gather and then on top of that more to sign, etc. When buying a home after a short sale the rules are different than when you bought the first time. Do you home work!  Research your area, ask a lot of questions of your realtor & broker. Know that there isn't a silly question, and all the ones you do as will help to make things less complicated for you. We bought a home in another state the second time around, the real estate laws are different state to state. Research the market(s) you may want to buy in.

5. Be Ready for anything!
I'm always going to be on the side of encouragement and being positive when it comes to this process. But that doesn't mean you shouldn't be realistic as well. In this type of transaction anything can happen, closing dates can get pushed back, loans can fall through, interest rates can change from what you thought you'd get, etc. We learned the hard way that anything can happen, nothing is final till the papers are signed and the keys are yours. I don't want you to think nothing will work out, but I'm just encouraging you to ask a lot of questions of your lender, broker, title company agents and realtors so that you are prepared for anything that might happen.

And lastly..........

Enjoy the process!
Buying a home can be stressful, time consuming and sometimes take longer than you think. Honestly there were times through this process that completely sucked all the joy out of buying a home but, My last piece of advice is to enjoy the process whatever it is. If you're buying a home after a short sale history chances are you've already waited a long time to be in the buying position again. Know that you are blessed with this amazing opportunity, embrace it and enjoy it as much as you can. God has blessed you so to be in this position again, awaiting a new and exciting chapter. Don't let the pressures, stress or frustration get to you. Lean on your spouse, family and friends to help you through this time. Most importantly draw closer to the Lord. Every good and perfect gift comes from above. James 1:7


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