"HOW LONG MUST I WAIT BEFORE I CAN BUY A HOME AFTER FORECLOSURE OR BANKRUPTCY?"

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Dillon and Austin (my eldest and middle sons) winning 3rd place and 4th place in Rancho Christian School's annual science fair Friday night :)

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"HOW LONG MUST I WAIT BEFORE I CAN BUY A HOME AFTER FORECLOSURE OR BANKRUPTCY?"

This is one of the questions I'm asked most often. Many people who were burned early by the financial crisis and recession are now in a perfect position to jump back into homeownership. The difference this time is it's a 50% off sale compared to when they bought the first time.

As I've stated before, it's been generations since housing has been this affordable in the Temecula Valley based on price per square foot and mortgage interest rates.

Please note the parameters below are subject to change but I highly doubt we'll see them become any more strict than they are now. If anything, we may see them loosened in the near future to help facilitate re-sale of the large amount of foreclosure inventory that is still to come.

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BUYING A HOME AFTER FORECLOSURE AND/OR BANKRUPTCY


Federal Housing Administration (FHA)
1) Foreclosure is 3 years
2) Deed-in Lieu is 3 years
3) Short Sale is 3 years - unless payments made on time thru closing
4) Bankruptcy is 2 years

Veterans Administration (VA)
1) Foreclosure is 2 years
2) Deed-in Lieu is 2 years
3) Short Sale is 2 years
4) Bankruptcy is 2 years

Conventional Conforming (FNMA/FHLMC)
1) Foreclosure is 7 years
2) Deed-in-Lieu is 4 years < 80% LTV and 5 years > 80% LTV for
primary residences. 7 years for second homes and investment properties
regardless of LTV.
3) Short Sales is 2 years < 80% LTV and 5 years > 80% LTV and 7 years >
90% LTV
4) Bankruptcy is 4 years

Conventional Non-Conforming (JUMBO)
1) Foreclosure is 7 years
2) Deed-in-Lieu is 7 years
3) Short Sale is 7 years
4) Bankruptcy is 7 years

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Another Billionaire says, “BUY REAL ESTATE NOW”

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Dillon’s (my eldest) school photography class award winning photo, “Sunset in Temecula”

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Another Billionaire says, “BUY REAL ESTATE NOW”

In my January 13th blog posting, I told you about John Paulson, the billionaire hedge fund manager who switched from betting against housing to now telling people they should buy a house…or even two houses.

Bill Ackman, the successful hedge fund manager behind Pershing Square Capital Management, is another case in point. He, too, saw the housing bubble before it popped. He made a now famous argument as to why the stock of MBIA, which guaranteed the slop coming out of the mortgage factories during the bubble, was going to crumble. And it did, netting Ackman more than $1 billion. MBIA was, at the time, one of the five biggest financial institutions in the US.

But now, like Paulson, Ackman is bullish on US housing. He recently made a compelling case for buying real estate NOW!

First, housing is cheaper now than it’s been in a generation. The median income is now 78% above what it takes to qualify for a fixed-rate loan on 80% of the median purchase price. Mix that with housing prices that are 30% off their peak nationally and low mortgage rates and you get a cocktail of affordable housing.

The second key part to the argument is to look at the number of forced sellers. As a buyer, it is more favorable to you if you buy from people who have to sell. Makes sense, right?

In housing, about 30% of sellers are in foreclosure or approaching it. These are national figures, so in markets like ours in Riverside County, there are more forced sellers than others. “Buyers benefit when conventional sellers compete with distressed sales,” Ackman says.

Ultimately, this process is good for the home market. As Ackman points out, “Overpriced and overleveraged homes will be transitioned to new, stable owners at more reasonable prices and on more favorable financing terms.” From such stable bases, new bull markets are born.

Third, we look again at financing terms and costs. You can borrow at about 5% fixed for up to 30 years, putting down only 20% (3.5% for FHA loans). You have no prepayment penalties – so you can, if rates fall, refinance. But if rates rise, you can sit tight. And you can deduct the interest from your taxes. It's a sweetheart deal!

Rates, by the way, haven’t been this low since the Freddie Mac survey began.
This also makes for a great inflation hedge. Even small price increases multiply the equity in your house, assuming conventional 80% financing and a 10-year holding period.

People who are skeptical of housing think prices won’t rise anytime soon. But as this exercise shows, you don’t need much of an increase. Even a 1% annual increase over a 10-year period gives you 2.7 times your money. Anything better and your upside soars!

Paulson and Ackman – two great investors – made fortunes betting against housing, but now they’ve changed their views as the market changed. Maybe we should too.

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My awesome dog, "Dash" ... truly man's best friend :)

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*** Credit Repaired ***
*** Debt Eliminated ***
*** GUARANTEED ***
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As a valued client and long-time sufferer of my Blog postings, you are probably aware that for many years I’ve been regarded as one of the top credit repair specialists in California.

In 2003, I wrote a book titled:

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The E-Book version became an internet sensation and turned me into an internet celebrity, albeit a minor one (I think you’re required to be involved in a Lindsey Lohan-esque scandal to be considered “major.”)

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I can be reached at 951-760-3833. Or email me at KenAHall@gmail.com.

www.FromDebtToProsperity.com

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