Recently, I have received a number of calls from homeowners saying that they’ve been told they can obtain a streamline refinance 2 years after short sale. I’m going to shed some light on that subject, as we are a direct lender without any specific overlays regarding this topic.However, there is a certain criteria you need to meet in order to get approved.
There is no rule on seasoning for short sale with FHA, meaning you could potentially have a short sale and obtain a loan immediately (read below for more info).
Pre-Foreclosure/Short Sale Definition:
* In general, a pre-foreclosure/short sale transaction occurs when the borrower sells the mortgaged property for less than the total indebtedness and the lender agrees to accept the net proceeds as satisfaction of the debt.
* In some cases, the lender may file a claim with the insurer for the difference or take out a deficiency judgment against the borrower.
* Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on their principal residence simply to take advantage of declining market conditions, and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
If the borrower has previously sold a property on a short sale, and the prior loan was not delinquent, the borrower is eligible for a new FHA loan if ALL of the following requirements are met:
What criteria do you need to meet in order to qualify?
* All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale.[/B]
* All installment debt payments were made within the month due for the 12 month period preceding the short sale.
* All payments for mortgages and installment debt were made within the month due for the 12 month period preceding the date of loan application for the new mortgage.
* The proceeds from the short sale serve as payment in full.
* CAIVRS reflects no claim.
As you can see, the first bullet point there mentions that you must have been current at the time of short sale in order to meet the “No Seasoning” requirements. If you were delinquent at the time of short sale (which most people were), you would not be eligible.
If you don’t meet the criteria above you would have to wait the 3 year seasoning requirement (for short sale or foreclosure) that FHA requires.
To qualify for an FHA loan or if you have questions, please call me anytime at 1-800-779-4547; or email me at Erik.Sandstrom@CaliberHomeLoans.com. You can also join our forum and ask questions about this article at this link.