Monthly Archives: September 2012
Have you recently experience a short sale and wondering when you will be able to purchase a home again?
There are different regulations for different loan types. We will provide the requirements for Fannie Mae, FHA and VA loans for a purchase after experiencing a short sale.
Fannie Mae Loan
With Fannie Mae, one can purchase a home in as little as 2 years after a short sale has been recorded if the buyer is putting 20% down on the home.
There is a 4 year waiting period if the buyer is putting 10% down on the home purchase.
Anything less than 10% will require a 7 year waiting period before being able to purchase a home through Fannie Mae.
With an FHA loan there are varying circumstances that affect one’s ability to purchase a home. The following information is provided by Hud.gov
Borrowers are not eligible for a new FHA- insured mortgage if they pursued a short sale agreement on his or her principal residence simply to
- Take advantage of declining market conditions
- Purchase at a reduced price a similar or superior property within a reasonable commuting distance.
Borrowers current at the time of Short Sale
Borrowers are considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage
- All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
- All installment debt payments for the same time period were also made within the month due.
Borrowers in Default at the time of Short Sale
Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for 3 years from the date of the pre-foreclosure sale.
There are exceptions to the following requirements; however, they require extenuating circumstances that are beyond the borrowers control. Hud.gov explains exceptions stating:
Exception: A lender may make an exception to this rule for a borrower in default on his/her mortgage at the time of the short sale if the
- Default was due to circumstances beyond the borrower’s control, such as death of primary wage earner or long-term uninsured illness, and
- A review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default
These circumstances would need to be discussed with a mortgage lender prior to pursuing a mortgage loan.
The general waiting period for a VA loan after a short sale is 2 years. However, like the other two loan programs, there are different regulations depending on the veteran’s circumstance for a short sale.
According to VALoans.com, a borrower may get approved for a VA loan after short sale, “if the buyer has a qualifying credit score plus a record of dependable payments during the waiting period, sometimes called a “seasoning period” following the short sale.
Anything less than a 2 year waiting period would be determined on the borrowers credit history, circumstance and the lender’s guidelines.
If the short sale was on a VA loan, the applicant may not have full entitlement available for the new loan.