My adorable 814-square-foot, ranch-style home on a corner lot in Tampa, FL, provided a postdivorce haven where I could spend carefree hours landscaping the big yard, decorating the original 1950s kitchen in period antiques, and hosting intimate gatherings.
And then it became my personal hell.
The real estate market crash hit Florida hard and early, affecting every segment of the state's economy. For me it forced a job change and relocation that required me to put my house on the market in spring 2007. My lender agreed to a short sale after a nearly four-year, nightmarish saga of terrible renters, soaring credit card debt, and never-ending paperwork. A lousy and painful journey shared by millions of others caught in the crosshairs of housing's collapse.
But a few weeks ago, I got my first welcome financial news in a very long time: I am once again worthy of a mortgage. No, I won't qualify for a grand mansion, but I've got my eye on an older condo in an up-and-coming neighborhood.
If you're in the same boat, I've got good news: Your time is coming soon, too. But there are a few tricks to navigating the process after a foreclosure or short sale to keep in mind.
We're back, baby!
People like me who suffered short sales and foreclosures in the real estate market collapse are coming back in droves for another shot at homeownership. A predicted 600,000 of us boomerang buyers will purchase homes in 2016, according to John Burns Real Estate Consulting in California. Overall, 3.7 million of us who lost homes during the crash will be back in the market by 2021, they say.
Other sources are bullish on us, as well. Fair Isaac Corp., creator of the FICO credit score, estimates 910,000 consumers' credit reports show foreclosure proceedings launched between October 2007 and October 2008. More than a quarter of those were clear by October 2014 -- the seven-year mark for those affected earliest in that period.
How long it takes to recover
Credit can start bouncing back as quickly as two years after a short sale or foreclosure. But for most people it takes closer to seven years.
Conventional Fannie Mae mortgages are available after only two years -- if the applicant had "extenuating circumstances" that led to the foreclosure. And the FHA requires a three-year waiting period for most home loans after a short sale where the buyer was in default.
No matter what, your credit score is the biggest factor in making you eligible for a mortgage again, so you'll want to focus on paying your bills on time and repairing your credit so the foreclosure or short sale is the only thing you're waiting to be cleaned from your credit report.
Want back in? You have two mortgage options
Banks are becoming more sympathetic now, as the victims of the housing collapse -- you know, the one that the banks helped create -- come back to the market.
"We've seen a lot of customers with short sales or foreclosures, but we can help if they work diligently to rebuild their credit score," says Richard Herrington, chairman and CEO of Franklin Synergy Bank in Franklin, TN. "Pay your bills on time."
So what are your options? A conventional mortgage underwritten to the standards of Freddie Mac or Fannie Mae or an in-house mortgage.
In the latter, the bank can ignore time limits and show discretion regarding a customer's risk. Awesome, right? Here's the catch: Those home loans tend to require a lower loan-to-value ratio and have higher interest rates and shorter maturities.
Indeed, the path can be difficult, says Michael J. Seiler, a real estate and finance professor at the College of William & Mary.
"A short sale is less of a ding on your credit, but a lot of lenders -- if you have a short sale or worse -- simply will not give you the loan," Seiler says.
Rejected? Try, try again -- with lots of local lenders
Working with boomerang buyers has become old hat for Julie McGee of Tampa Home Sales, the Realtor who handled my Florida short sale. Her secret? She advises buyers to apply with local banks and credit unions, because those are more invested in their communities' success and are more willing to consider extenuating circumstances.
"Most lenders will start to consider you for a new home purchase within two or three years after a short sale, but the most important thing is that you have to talk to different lenders, because they all have different criteria for qualifying people post short sale," McGee says. "Large, mainstream banks will be the most difficult."
How I got back on track
I followed all the experts' advice to restore my credit: Every bill has been paid on time since my 2011 short sale, I paid all my credit cards down to zero with the exception of one, and I have $10,000 saved for a down payment.
My recent reception from a large, mainstream bank was not exactly warm and fuzzy. The mortgage loan officer who reviewed my application said I could qualify for a small mortgage, but now that I'm remarried, he said, it may be better for my husband to go it alone.
But I'm taking even that glimmer of an approval as a positive. After all, my short sale hurt my credit so badly, I once was rejected trying to finance a queen-size mattress set.
Today, I can probably get both the mattress set and that little condo I've got my eye on, if I keep my credit score clean, find the right lender, and keep hope alive.