Buying a House in 2016 after a Short Sale
There are many factors that will affect your ability to qualify for a loan in order to buy a house again after a short sale. If you have taken good care of your credit since, paid all your bills on time in the last 12 months, have money saved for down payment (as little as 3.50% to 20% down payment), and of course, you have income to qualify after a short sale, then yes, it is possible to buy a house again in as little as 12 months to 36 months after a short sale subject to certain conditions. For more information on buying a home after a short sale, please please send us a message by filling out the contact request below to tell us your specific situation. We work with a team of real estate professionals who can help make your dream of home ownership come true again.
- How Long Do I Have To Wait After a Short Sale Before Buying a House?
- Here are your loan options to buy a house after a short sale
- Buying a House with an FHA Back to Work Program one year after a short sale with 3.5% down payment
Did you know? FHA announced on August 15, 2013 that you may only need to wait one year to be able to buy again under the FHA’s Back to Work Program. FHA is willing to back loans for borrowers with as little as 3.50% down payment after having had a short sale, bankruptcy, or foreclosure. This is subject to guidelines such as having experienced an Economic Event which is beyond your control that results in a Loss of Employment, Loss of Income or a combination of both, which causes a reduction in the your Household Income of 20% or more for a period of at least 6 months. Note: If you did a prior short sale or were delinquent on a prior FHA loan, you will not be able to buy after one year with this program using an FHA loan.
With FHA’s prior guidelines, you can buy a home immediately after a short as long as the mortgage and existing debt has zero late payments in the past 12 months. Extenuating circumstances that led to your short sale will also have to be documented such as certain hardships like job loss AND subsequent job transfer/relocation at least 2 hours drive time from prior residence, catastrophic medical bills (and/or death) incurred by a member of the borrower’s “nuclear family. Please note that divorce and relocation by themselves are not considered an extenuating circumstances unless combined with other factors such as job loss, reduction of income by more than 20% over a 6 month period, or other hardships. Please send us a message below and let us know in detail your specific situation to find out if you qualify.
Buying a House with an FHA loan one year after a short sale with 3.5% down payment with NO LATE PAYMENTS prior to short sale
You would qualify to buy again after a short sale IF you meet the following criteria: you can document a hardship, you were NOT late on your mortgage payments at the time of the short sale, proceeds from the short sale served as payment in flu for the loan, you have a clear CAIVRS report (Credit Alert Verification Reporting System), and you have an M1 mortgage credit rating for that previous account.
Buying a House with a Conventional Loan TWO years after a short sale with 20% down payment
You can buy a house after two years with a 20% down payment using a conventional loan. While waiting 2 years after your short sale, you should get to work on improving your credit rating and saving for down payment. Saving for a 20% downpayment not only helps you buy a home sooner after a short sale, but helps avoid expensive mortgage insurance on loans with less than 20% down payment. Some lenders give you the flexibility of coming up with the 20% downpayment using a combination of pledged personal assets. With Fannie/Freddie Loans, you will have to wait 4 years if you only have 10% down payment or possibly wait just 2 years if you have extenuating circumstances that lead to the short sale of your home.
Buying a House with a Conventional Loan TWO years after a short sale with 10% down payment and extenuating circumstance
You may be able to buy a house 2 years after a short sale with 10% downpayment if you can document and verify acceptable extenuating circumstances prior to your short sale. Examples of extenuating circumstances are one time events beyond your control that cause a significant and prolonged reduction in income or a catastrophic increase in your financial obligations. If you are ready to buy a home again with 10% downpayment, please send us a message below.
Mortgage after a short sale update: August 16, 2014
Fannie Mae Desktop Underwriter (DU) will change on August 16, 2014. For buyers after a short sale using conventional loan products, the waiting period will change from 2 years to 4 years after a short sale on Conventional loan products. These changes will apply on loans taken on or after August 16, 2014. For more information on how this affects your loan situation, please send us a message below. Note that the typical wait time to get an FHA mortgage after a short sale is 3 years.
Buying a House with a VA Loan TWO years after a short sale with Zero Down payment
You can buy a house after a short sale with a VA loan 2 years after completing a short sale on a prior VA loan. For some VA lenders, the waiting period after a short sale can be as little as one month if you have not been late on any mortgage payments before the final short sale and you have a 660 or better credit score. You might also qualify for an automated underwriting approval and get a VA loan. In general, VA requires a 2 year waiting period from a major derogatory event including short sale, bankruptcy, or foreclosure.
Buying a House with a VA Loan ONE year or less after a short sale with Zero Down payment
If your former loan on the home you short sold was either a VA loan or a non- VA loan, your wait time may be less than 2 years if you have a clear CAIVRS. CAIVRS is a report pulled by lenders for government loans (FHA, VA USDA) to verify that the borrower does not currently owe money to the government for previous mortgage, student loans, liens, etc. You must also document an acceptable hardship that led to the short sale such as unemployment, large medical bills not covered by insurance. Please send us a message by filling out the contact request form below to learn more information from the lenders that we work with.
Buying a house after a short sale with 25% to 30% down payment just one year after a short sale
If you do not qualify for the FHA back to work program with 1 year wait after a short sale and you have saved 25% to 30% down payment, there are lenders willing to finance your home purchase with just 1 year waiting period after a short sale. The applicable interest rates are higher on loans with a 25% downpayment compared to a 30% downpayment loan. The rates are usually fixed for the initial 5 years or 7 years on a 30 year loan until you can refinance again (usually 3 years after a short sale). Some lenders may require a minimum loan amount of $300,000 and may require a credit score of 680 with 12 months of payments cash reserves. Please fill out the contact information to receive more information from the lenders we work with.
Buying a house 3 years after a short sale
If it has been 3 years after your short sale event, you may now be eligible to buy again with as little as 3.5% down payment. Please be sure to check your credit report to confirm that the short sale was accurately reported on your credit report. Some recent inaccuracies are those of short sales being reported as foreclosures. The short sale is typically reported as settled for less than full balance. If this is not the case, i.e. it shows settled for less than full balance Chapter 5, 8 or 9 (synonymous to foreclosure) be sure to contact the creditor and get this corrected immediately.
Buying a house in 2015 after your short sale in 2012, 2011, 2010 or earlier years
Those who have completed a short sale in 2009, 2010, 2011, 2012 and earlier years are most likely ready to apply for a loan after a 3 year waiting period has passed from the date of the short sale. You may now be able to buy a home again in 2015 and apply for a loan without consideration of any special circumstances. You will want to watch the video below and read the tips below to qualify for a loan after a short sale.
Buying a house in 2015 after short sale in 2014 with extenuating circumstances
Your wait time to buy a house and qualify for a mortgage after a short sale in 2015 could only be 12 months to 24 months if you can prove that you have extenuating circumstances that led to your short sale. For example, extenuating circumstances are major illness or death of a wage earner, non-recurring situations that leads to a sudden, significant, and prolonged reduction in income or catastrophic increase in your mortgage payments and other financial obligations. Note that divorce or a job relocation are not typically viewed by lenders as sufficient extenuating circumstances. Please send us a message below for more information.
Buying a House 4 years after a short sale in California with 10% down payment
We have good news for you if it has been FOUR years after your short sale and you are ready for homeownership again and you saved at least 5% down payment, please be sure send us a message by filling out the contact form request above for more information on buying a house in California, Oregon, and Washington after a short sale and also avoiding mortgage insurance.
If you have lost your home through a short sale and want to get another mortgage loan, you may be wondering how long you'll have to wait. Your credit will take a hit after a short sale, although possibly not as much as it would if you had lost your home through foreclosure. Nevertheless, a short sale will likely prevent you from getting another mortgage right away. The amount of time you must wait before applying for a new mortgage loan depends on the type of lender and your financial circumstances. Read on to learn more.
Getting an FHA Loan After a Short Sale
The amount of time you must wait to obtain a new FHA mortgage varies, depending on your credit history and the reasons for the short sale.
No Waiting Period
- You may not have to wait to apply for a FHA-insured mortgage loan following the short sale if:
- you were not in default on the prior mortgage at the time of the short sale, and you made all of your old mortgage and other installment debt payments on time for at least 12 months leading up to the short sale.
If you were in default on the old mortgage loan at the time of the short sale, then you must wait at least three years before applying for another FHA loan. The three-year waiting period starts to run from:
- the date of the short sale, or
- if the prior mortgage was also an FHA-insured loan, from the date that FHA paid the claim on the short sale.
- Exceptions to the Three Year Waiting Period
You may be able to qualify sooner than three years if you can show that extenuating circumstances caused the mortgage default. Extenuating circumstances might include:
- serious illness or death in the family, usually involving a primary wage earner
- divorce (in limited situations), or
- job loss.
You must also show that you had good credit prior to the event that caused you to default on the old mortgage. That means you should make all of your debt payments on time following the short sale.
When You Will Not Be Eligible for a New FHA Loan
Notwithstanding whether or not you defaulted on the old mortgage loan, you are not eligible for a new FHA loan if you were using the short sale simply to take advantage of cheaper housing prices. That means you cannot use the short sale as a way to get rid your old house in a declining housing market and buy a comparable house for a lower price.
Getting an Fannie Mae/Freddie Mac Loan After Short Sale
Waiting periods for a Fannie Mae or Freddie Mac mortgage loan following a short sale vary, depending on the circumstances. It depends in large part on how much money you are able to put down as a down payment. Your waiting period will be:
- two years, if the maximum loan-to-value (LTV) ratio of the loan is 80%
- four years, if the maximum LTV is 90%
- seven years, if the LTV ratio falls within Fannie Mae's eligibility matrix
In other words, you'll have to make a 20% down payment to wait two years, 10% down payment to wait four years, or the minimum down payment if you wait seven years.
Exceptions to the Normal Waiting Periods
You may be able to shorten the waiting period to two years for a Fannie or Freddie loan if you can also meet the following requirements:
- prove in writing that the short sale was the result of extenuating circumstances, and
- the maximum loan-to-value (LTV) ratio of the new mortgage is 90%.
Also, the seven-year waiting period only applies to conventional loans that are sold to Fannie Mae or Freddie Mac. This rule does not apply to Fannie or Freddie loans that are FHA-insured.
Conventional, Private Lenders
For most other types of lenders, the waiting periods can vary. Most lenders tend to follow Fannie Mae's guidelines for post-short sale mortgages. Other lenders may shorten the post-short sale waiting period, provided that you make a larger down payment (sometimes 25% or more) and agree to a higher interest rate. You will also need to have good credit.
Your FICO Score
Notwithstanding the waiting periods, for each type of lender, you must still establish good credit following the short sale. That means your FICO score must meet the lender's minimal requirements to qualify for a post-short sale mortgage loan. Alternatively, while you may be able to obtain a new mortgage with a low FICO score, you may have to make a larger down payment or pay a higher interest rate.
Short sales can damage FICO scores. And the higher your credit score, the bigger the FICO drop with a short sale. You may fare slightly better if the short sale resulted in no deficiency (meaning you sold the house for more than what you owed on the mortgage loan) than if the short sale did result in a deficiency.
To re-establish good credit and boost your FICO score, you should:
- always pay your bills on time
- keep your credit account balances low
- monitor your credit report for errors and inaccuracies, and
- maintain a small number of credit accounts.
Monitor and Correct Your Credit Report
It is essential that you review your credit report immediately if you anticipate applying for a new mortgage following a short sale. That is because short sales are frequently reported as “foreclosures” on credit reports. If your short sale is reported as a foreclosure on your credit report, you may be erroneously denied a new mortgage loan because:
- your FICO score is lower than it should be (foreclosures are more damaging to FICO scores than short sales)
- the lender mistakenly applied a longer post-foreclosure waiting period against you when you would have otherwise qualified, or
- the lender required you to make a higher down payment than what you would have been required to make if the short sale were properly reported.
Have a question about a home or want to talk about selling yours? Or, if you have any other questions or comments, then feel free to e-mail or call using any of the information below. You will get a response as quickly as possible.
|Sean Seckar - RE/MAX of Santa Clarita|
|BRE License # 1336429|
|25101 The Old Road|
|Santa Clarita, CA 91381|