Many home buyers from the 2003 – 2005 era are now “upside down” in their mortgages (ie, they owe more than their home is worth), especially if they had little or no equity in their home when they bought. The substantial drop in home values, with the possibility of re-setting mortgages and the inability to re-finance have created a no-win situation for many.

What to do? Fannie Mae may give some guidance on your decision making.

Their guidance is for re-applying for a home loan after a prior foreclosure, bankruptcy or what they call a “preforeclosure” sale.

If you simply “walk” from your home and allow it to go through foreclosure, Fannie Mae says the waiting period is 5 years.

But, if you do a short sale (“preforeclosure” sale) of your home, the waiting period is just 2 years – big difference!

We’ve seen so many homes simply go through the foreclosure process when the owners could have done a short sale. So with the right choices, in just 2 short years, you could be a homeowner again! Hopefully, this knowledge is power!

See the complete Fannie Mae guidelines here.