Click the play button on the video window to the right to see the storyPHOENIX -- It has only been three months since Tracy Smith lost his home in the West Valley to foreclosure, but he's already looking to the future and buying a new home.
"I can't afford a house," he said. "I can't put money back into the system."
Smith, like thousands of others going through foreclosure in the Valley, is wondering what the experience will do to their credit and ability to buy a house in the future.
"I'm looking for the answer as to what happens after foreclosure," Smith said.
Mortgage expert Dean Wegner says foreclosure is not the end of the world, but there are some steps you can take right now to make it easier to get back into the housing market in the future.
The rule of thumb, Wegner says, is a waiting period. If you sold your home as a short sale, you generally have to wait two years to try to buy a house. If you have a foreclosure, the waiting period is three years.
Wegner believes buyers who went through foreclosure in 2005 and 2006, the very beginning of the housing crisis, will begin working their way back into the housing market.
"What we're forecasting is one third of the buyer pool going forward will have some sort of mortgage blemish on their credit report," Wegner said.
That means thousands of buyers will be in the same boat, and banks may have to adjust some of their credit rules, Wegner said.
Wegner advises taking steps now to ensure an easier path to a mortgage in the future, even if you're just now going through the process.
If you're undergoing foreclosure because of a hardship, like a job loss, medical bills, or a divorce, Wegner said, document everything.
"Write letters explaining why you're going through foreclosure. Share that pain."
Those hardships will make the loan process easier, and separate you from home flippers and investors who simply skipped out on their loans when the market went south.
Wegner also advises guarding your credit score by prioritizing what you pay. In some cases, he said, you may want to skip the mortgage payment and make every other payment first.
"If you know you have to downsize and there's just no way out, pay everything else first and let the mortgage go," Wegner says. "That way you have an isolated incident (on your credit report). That one deliquent item will actually give you a better score down the road, than if you skip out on five or six credit card and car payments.
Wegner advises using that three year waiting period to clean up your credit score by clearing up any discrepancies and eliminating debt. By using that time to save money and repair your financial system, he said, you should be able to buy a home in three years.
Sadly, Wegner said, most people never pull their credit report. "They're afraid to look," he said.
