How to Get a Loan After a Short Sale
If you can no longer afford to make mortgage payments on a property, selling the home is a good option to keep your credit intact. If the home's sale price will not cover the remaining balance on the mortgage, your lender can agree to a short sale, which means they will accept the home's sale as final resolution of the mortgage debt. While this is preferable to foreclosure for you, it is still damaging to your credit and ruins your chance at profit. Getting a future loan is challenging, so you must restore your credit and assets first.
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Instructions
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Start saving for a down payment. You will likely be required to place at least 20 percent down on a future home purchase.
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Save at least three months' salary in an emergency account before buying a new home. A lender may check your bank account balances to ensure you are not at risk of a similar problem in the future.
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Approach alternative lenders. Your previous bank or finance company will not likely fund the loan. Consider online lenders or high risk lenders.
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Agree to high monthly payments. High monthly payments on your part can reduce the lender's risk.
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Provide proof of income for the past two years. The lender needs to know you can afford the high payments you are agreeing to.
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Budget as necessary to make all payments on time. Missing a payment on a high risk mortgage could quickly lead to another loan problem, such as high finance fees or short foreclosure periods.
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Tips & Warnings
Be prepared to accept high interest rates on your new mortgage after a short sale; this may include an adjustable rate agreement. Even though this may be the only way to secure a loan, walk away if the rates are too high. By waiting just a few years, you can build your credit and get a better loan.
References
- Photo Credit House for sale image by Heng kong Chen from Fotolia.com
