Prospective Buyer

[bachbaron]

I had a short sale that was completed in June 2008 of a home I had when I lived in Arizona. I moved to Texas in October 2006 and the home had sat on the market for almost 2 years until it finally sold last year.

My question is now my fiance and I are thinking about purchasing a home here in Texas. How will the short sale effect my ability to get a loan for a home here in Texas? We are looking for about a $200,000 mortgage - nothing jumbo. We want 30 yr fixed.

Any advice would be much appreciated.

[Moe Bedard]

Here are the new guidelines and timelines for getting a new Conventional or FHA or VA loan.

Fannie Mae/ Freddie Mac two private US-based mortgage buyer powerhouses, have set new guidelines to protect business interests and to further safeguard its buyers from foreclosure. The fresh set of policies will affect borrowers who have loan applications submitted after August 1, 2008.

What factors affect the waiting period?

A waiting period is the time from the completion of the foreclosure until the time when buyer decides to purchase a new home. Under the new rules, the length of waiting before one is approved for a conventional loan would depend on two factors – the kind of foreclosure and the extenuating circumstances.

Waiting Period under the Different Kinds of Foreclosure
Given these new considerations, the length of time before one can buy a home depends on the kind of foreclosure:

Foreclosure – 5 -7 years
Foreclosure which has extenuating circumstances – 3-7 years
Deed-in-lieu of foreclosure – 4-7 years
Deed-in-lieu of foreclosure with extenuating circumstances – 2-7 years
Short sale – 2 years

Extenuating Circumstances
Factors beyond a person’s control are called documented extenuating circumstances. Fannie Mae/Freddie Mac lessens the waiting period if a borrower is affected by the following uncontrollable factors:

Death (not the borrower’s)
Job transfer
Sickness
Accidents which result to severe injury

Additional Guidelines:

Fannie Mae/ Freddie Mac, also have additional guidelines for its buyers. Borrowers should look towards buying a primary place of residence. This means that rental or vacation houses are not considered.

Aside from this waiting period, the following may also required by Fannie Mae/ Freddie Mac for some loans:

a FICO score in the required minimum
a 10% down payment



FHA loan guidelines are a little more lenient than conventional guidelines

Foreclosure/Short Sale 3 years after foreclosure has been completed
Chapter 7 Bankruptcy 2 years after charge off
Chapter 13 Bankruptcy 1 year (everything must be paid off)



Veteran Administration (VA) loans typically take up to two years after a foreclosure, short sale or bankruptcy. The borrower(s) must provide proof that there is no outstanding debt. Credit must be re-established along with an explanation letter and full VA entitlement.

Some lenders will not allow a mortgage within 7 years if you are applying with the same lender that the foreclosure or short sale occurred through. They probably have a bad taste in their mouth from the previous mortgage.

[Janeen]

In short, try to qualify without you being on the loan because they will run your credit & see the short sale. Lenders have a seasoning period before they will allow you to qualify for another home loan. You can always be added to the title. If your income is needed in order to qualify..since you are not married, you could represent your income as a tenant that pays rental income w/ a rental agreement. Then the lender will not run your credit. Becareful some lenders also do not allow rental income within the subject property being purchased as additional income. Check with your lenders guidelines.

[bachbaron]

Thank you both for your help and advice. After further discussions, I think we are going to rent for another 12-24 months and then see what the market is like. This will give us more time to save for a down payment and shore up our finances.

This website is really a special thing. The wealth of knowledge by all the members is priceless.

[Moe Bedard]

Sounds like a good solid plan...........


Good luck to you!!