October 2, 2014

Buying a house after a Short Sale in 2014

Buying a House after a Short Sale in 2014

buying-a-house-after-a-short-saleThere 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 2014 after your short sale in 2010, 2011 or earlier years

Those who have completed a short sale in 2009, 2010, 2011, 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 2014 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 2014 after short sale in 2013 with extenuating circumstances

Your wait time to buy a house and qualify for a mortgage after a short sale in 2013 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.

Watch the video below and learn about your loan options to buy a home after a short sale.

Other Tips on Buying a Home after a Short Sale

What You Should Work On To Be Eligible to Buy  A House After A Short Sale

  • Pay all your bills on time and improve your credit scores over time to be at least 620.
  • Request a copy of your credit report and correct any inaccuracies as early as possible with the credit reporting agencies. You may visit annualcreditreport.com to obtain a free copy of your credit report from Experian, Equifax, and Transunion.
  • To find out your exact waiting period after a short sale, find out when the mortgage insurance claim was paid on your prior mortgage after a short sale.
  • While renting, save as much money as you can for a down payment.
  • Keep a steady job/ income to qualify for a new loan.
  • If you would like to qualify for as much as you can to buy your dream home, hold off from signing up to new monthly obligations such as car loans, credit card payments, etc.
  • Receive homeownership counseling or a combination of homeownership education and counseling provided that each participant receives, at a minimum, one hour of one-on-one counseling from HUD-approved housing counseling agencies. A list of agencies can be obtained online at http://www.hud.gov  or calling: 1-800-569-4287. This is required to be completed 30 days before applying for a loan using FHA’s back to work program.

If you are are serious and absolutely ready to take the step of getting a pre-approval before shopping for a home, below you will find the typical documentation that the lender will ask from you:

  • 2012 and 2013  Federal Tax Returns 1040’s (All Schedules)
  • 2012 and 2013  W2s
  • 2011 tax returns if you have them to help the lender look at how your income was before the hardship started
  • One month’s most recent paystubs
  • Most recent two months’ worth of bank statements to show where the down payment/closing costs are coming from (all pages even blank ones in a set)
  • Letter with details of the circumstances of the i.e. foreclosure, short sale, your medical condition, how it impacted your income, and if you continue to be affected by the medical condition, or if you are back to working your normal hours. You will want to include dates to help the lender establish a timeline.
  • Note that the lender will need to find out more information on the property address that was sold in a short sale.

Are you ready to take the first step to buy a home again after a short sale?

If the answer is yes, please fill out the form below and tell us your story. We work with a team of lenders and agents who are ready to help make homeownership a reality for you!

Full Name(required)

Phone (required)

When was your short sale completed? (required)

What city/area/location do you prefer for your next home purchase? If your preferred area is outside of the areas we cover, we will have a local lender and agent contact you in your desired area anywhere in the United States (required)

Please describe the circumstances/hardships that led to your short sale? (required)

May we have your permission to share your contact information with a lender regarding pre-approval? Please check the appropriate box(required)
 Yes, please have a lender contact me No, please do not have a lender contact me

May we have your permission to share your contact information with an experienced agent in your area to help you find a home once you are pre-qualified for a loan? Please check the appropriate box(required)
 Yes, please have an experienced agent in my area contact me No, please do not have an experienced agent contact me

How do you rate your motivation to buy a home? 1= Lowest and 5= Highest
 1 2 3 4 5

How much downpayment do you have available to buy a home? (required)

What is the purchase price of the home you would ideally like to own? (required)

What is your current estimated annual income to qualify for a new loan? (required)

When did you start your current job and/or business? (required)

What are your monthly debts? Please include any car/student/credit card payments, etc. (required)

When do you need to move into a new home? (required)

What type of property are you looking for? (required)
 Single Family Home Condo/Townhome Other

What is the minimum number of bedrooms/bathrooms you would like to have in your next home?

Are you currently working with another real estate agent to represent you in buying a home? (required)
 Yes No I have signed a written buyer's agent exclusive representation

Please tell us the best day(s)/time(s) to contact you to discuss your plans to buy a home again? (required)

Your Preferred Email (required)

Please let us know any additional comments and questions?

Was your prior short sale a strategic default?

A strategic default is when you sold your home to take advantage of the housing market’s past decline and purchased another similar or better house at a reduced price, which is within commuting distance to the house you previously sold. If  the short sale of your home was a strategic default then you would have to wait 7 years to qualify for a loan to buy a home again.

Buying a House with FHA loan after a Strategic Default Short Sale

If you did a strategic default as defined above on your primary residence: you may not qualify for a 3.50% FHA Loan in the foreseeable future! Your option: you will have to save more money for down payment and get a conventional loan instead that requires 20% down payment and wait up to 7 years. Unless, the rules and guidelines change in the meantime.

Buying a House with Conventional loan after a Strategic Default Short Sale

If you did a strategic default on your primary residence and would like to use a conventional loan to buy a house, you will have to wait 7 years to buy a house again.Unless the rules and guidelines change in the meantime.

Buying a House with a VA loan after a Strategic Default Short Sale

If you have late payments prior to the short sale, expect most lenders to tell you that you are going to have to wait a minimum of 2 years and have no late payments on any credit account in the last 12 months before applying for a VA loan.