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How long after short sale to purchase new home?

Discussion in 'Short Sale Outpost' started by milestogo, Feb 26, 2012.

  1. milestogo

    milestogo LoanSafe Member

    I short sold my home in March, 2011. I'm currently working with a lender to try and get pre-approved to purchase a new home. They mentioned that the laws just changed last week concerning how long one has to wait post-short sale to qualify to buy a new home.

    Is anyone aware of what the new legislation says?

    Also - what can I expect in terms of penalization through interest rates, etc?

    My current credit score is about 720.

    Thanks!
  2. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    The first step you will want to take when applying for another home loan is to review what lead to your short sale. Most lenders will require a 24-36 month seasoning period before applying for another mortgage if you were delinquent on your previous property. From my understanding for a conventional loan this may be 3-4 years, and for an FHA loan only 2-3 years before being eligible. But there are portfolio lenders that may be looking to look around the ss if you meet all underwriting requirements and possibly provide a higher down payment than normally required..

    You will also want to manage your credit very carefully. You can obtain your credit report from the three reporting bureaus free of charge once per year. When you receive this report you will want to check it for accuracy and make sure all of your other debts are current. By doing this you will greatly increase your appeal to potential lenders and get started on the right track to restoring your credit score. Another way that you can increase your attractiveness to potential lenders is to lower your debt to income ratio. Lenders will look at the total income you make per month and compare that figure to your monthly expenses. If the ratio is too high you are less likely to receive a loan. Having a solid financial budget will help you out a great deal when trying to secure another mortgage.

    Be up front with possible lenders when discussing your past. Letting them know about your past situation and the current steps you are taking to correct this will help you to get that second loan. If you can provide documentation about your short sale, current financial situation and how you are taking appropriate steps to rectify this you will greatly increase your chances of obtaining another mortgage.

    While it certainly is no easy task trying to get another mortgage after a short sale it is something that still can be done.
  3. milestogo

    milestogo LoanSafe Member

    Evan, you're the best! Thank you once again for a very helpful and informative answer.

    We did have 1 30-day past due payment on our account at the very end of the loan/short sale process. There were no others in the 5 years of payment history. Does this still push us to the 24 month waiting period? I do believe we had Fannie Mae.
  4. NNWalking

    NNWalking LoanSafe Member

    Hello,

    i'm kind of in the same situation, except i completed a short sale with (4) 40 day lates on the report. it is being reported as completed with less that full balance paid and CO on Experian.

    question: will i still be able to purchase a home after 2 years? i read a thread on a different MB that said even if i completed a short sale, if foreclosure process was started i have to wait as if the sale was a foreclosure. is this true?
  5. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    I do not believe that is true.. Many people who go through a short sale do not complete the sale until the foreclosure process has begun.. They also reported your account paid for less than full balance which is definitely not the same as a foreclosure..
  6. roger54

    roger54 LoanSafe Member

    Now I am really confused. I thought you had to wait at least 2 years in order to get another mortgage if you shortsale regardless if you missed a payment or not. I am current with all my payments but am looking at short selling because I am under water big time on my house. Are you sure if I didn't miss a payment and was successful at the shortsale that I could still get another mortgage before 2 years?
  7. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    From my understanding, if you completed a short sale without missing any payments then yes you may be able to qualify for a new mortgage almost immediately after completing the ss.. Of course everyone's situation is different when they complete the ss, but if your financial situation is good and meet all requirements for the mortgage, you may be able to secure financing. Some lenders may require a higher down payment (possibly 25% or more) or other stipulations in this situation.
  8. ncalunderwater

    ncalunderwater LoanSafe Member

    Hi, Evan-
    Could you please give more information about why you think that the 24-month rule does not apply if a short seller was not 60+ days behind? This makes a huge difference for many people who only missed a payment on the advice of their agent to get a short sale closed.
    Thanks,
    NCalUnderwater
  9. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    I believe there is specific information from Fannie or Freddie I will try to locate. It is my understanding that there is no waiting period to qualify for a new mortgage after completing a short sale as long as the account was current - but of course everyone's situation is different as well as lender's underwriting requirements to obtain the loan.. Also if you are able to complete the short sale while current the impact to your credit will be very minimal and generally about 40-80 points..
  10. Cat Damiano

    Cat Damiano Mortgage Wars

    Fannie Mae will now allow you to purchase a home 2 years after a short sale with a 20% down payment and 4 years after with a 10% down payment, with re-established credit. If there were documented, extenuating circumstances, you may be able to buy after 2 years with 10% down.


    FHA has a 3 year waiting period after short sale, however, you may be eligible for a new FHA loan immediately after a short sale if:



    o All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale and,
    o All installment debt payments for the same time period were also made within the month due.
    Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to:
    o Take advantage of declining market conditions, and
    o Purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
    Borrowers in default on their mortgage at the time of the short sale are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.
  11. Maplemissy

    Maplemissy LoanSafe Member

    We short sold in March with one 30-day late reported to all three credit agencies, and (as detailed below) are locked out for three years for FHA, 2 years for conventional with 20% down, 4 years with 10% down, etc. etc.

    It's not a huge deal for us, because we weren't in a hurry to buy, but a really, really good deal came on the market in our new town (short sold due to job relocation) and we took a bite about two weeks ago. Our agent knows some "creative" brokers and while all were sympathetic to our cause, none said they could get approval even though all agreed it would be a "solid" loan.

    We stopped paying at the insistence of our lenders, and voila, were approved as soon as the accounts were late. That we were only acting on the advice of our lenders didn't really matter to the underwriters, nor did they care that we short sold for a job relocation, that we stayed current on a vacant home in another state for several months while trying to complete the short sale, that our (excellent) credit scores are higher now than they were before we put our home on the market, or that we were prepared to put 10% down. All that mattered to them is the 30-day late, and the reporting of the account as 'settled for less than full.'

    It's frustrating, but hard to feel sorry for ourselves. Still elated that we completed the short sale and our free of our former home. Just settling into the waiting game, and crossing days off the calendar :)

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