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Conventional Loan After Short Sale Mortgage Guidelines

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Conventional Loan After Short Sale Mortgage Guidelines

This BLOG On Conventional Loan After Short Sale Mortgage Guidelines Was UPDATED On September 4th, 2018

Fannie Mae and Freddie Mac are the two mortgage giants that sets conventional mortgage guidelines.

  • Conventional Loans are called Conforming Loans because they need to conform to Fannie/Freddie Mortgage Guidelines
  • Waiting Period After Housing Event on conforming loans is different than government loans (FHA, VA, and USDA)
  • Government Loans have the same waiting period after foreclosure, deed in lieu of foreclosure, short sale
  • Conventional Loans have different guidelines on waiting period after short sale and deed in lieu versus standard foreclosure
  • Qualifying For Conventional Loan After Short Sale and/or Deed In Lieu Of Foreclosure is four years versus seven year waiting period after standard foreclosure

Waiting Period After Housing Event On Government Versus Conforming Loans

  • The Federal Housing Administration, FHA, looks at foreclosure and short sale the same as a regular foreclosure
  • The waiting period after short sale, deed in lieu of foreclosure, foreclosure is all the same
  • FHA guidelines on waiting period after short sale, deed in lieu of foreclosure, foreclosure is all three years
  • VA Loans has a two year waiting period after foreclosure, deed in lieu of foreclosure, short sale and Chapter 7 Bankruptcy
  • Three year mandatory waiting period after the recorded date of a foreclosure and/or deed in lieu of foreclosure and three year waiting period after the date of the short sale to qualify for FHA Home Loans
  • There is a two year waiting period to qualify for a FHA Loan after Chapter 7 Bankruptcy
  • The waiting period starts from the discharge date of Chapter 7 bankruptcy

Foreclosure Versus Deed In Lieu And Short Sale On Conventional Loans

With Fannie Mae, there is a 7 year waiting period after foreclosure to qualify for a conventional loan.

  • However, to qualify for a conventional loan after short sale or deed in lieu of foreclosure, the waiting period drops to a 4 year waiting period
  • 5% down payment is required on conventional loans
  • First Time Home Buyers can qualify for Conforming Loans with 3% down payment
  • First Time Home Buyers is defined as someone who did not have an interest in home ownership for past three years
  • Short Sale and deed in lieu of foreclosure is classified in the same class and Foreclosure in a different class with Fannie and Freddie
  • Fannie Mae and Freddie Mac has shorter waiting period requirements on short sale and/or deed in lieu of foreclosure than they do with standard foreclosure

What Happened To 2 Year Waiting Period After Short Sale With 20% Down Payment?

If home buyers Google ” Waiting Period to qualify for conventional loan after short sale or deed in lieu of foreclosure”, they will get dozens and dozens of articles.  The first few pages will highlight that there is a 2 year waiting period to qualify for a conventional loan with 20% down payment.

  • Unfortunately, all of those articles are now not accurate
  • This is because Google has not updated the correct information or updated blogs from mortgage writers and bloggers
  • Fannie Mae has eliminated the 2 year waiting period after short sale and/or deed in lieu of foreclosure to qualify for a conventional loan with 20% down a few years back
  • Many home buyers who were nearing the 2 year waiting period mark after short sale or deed in lieu of foreclosure with 20% down payment were just absolutely devastated due to the end of this guidelines
  • Since Fannie Mae came up with new mortgage guidelines on waiting periods after short sale and deed in lieu of foreclosure to qualify for a conventional loan, buyers either needs to wait until they qualify for FHA Loans and/or can qualify with NON-QM Loans
  • There is no waiting period to qualify for NON-QM Loans after short sale, deed in lieu, or standard foreclosure

FANNIE MAE Guidelines On Waiting Period After Housing Event And Bankruptcy

FANNIE MAE guidelines with regards to waiting periods after short sale, deed in lieu of foreclosure, foreclosure, and bankruptcy to qualify for a conventional loan has changed:

  • WAITING PERIOD AFTER SHORT SALE AND DEED IN LIEU OF FORECLOSURE TO QUALIFY FOR CONVENTIONAL LOAN: 
    • There is a 4 year mandatory waiting period after short sale and foreclosure to qualify for a conventional loan
    • 5% down payment and re-established credit after the short sale or deed in lieu of foreclosure with no late payments in the past 12 months
    • Most mortgage lenders do not want to see any late payments after the short sale or deed in lieu of foreclosure
  • WAITING PERIOD AFTER FORECLOSURE
    • There is a mandatory waiting period of 7 years after foreclosure to qualify for a conventional loan
    • Waiting period start date is from the recorded date of foreclosure
    • Borrower needs re-established credit after foreclosure and no late payments in the past 12 months
    • Most mortgage lenders have investor overlays that require no late payments after the foreclosure
  • WAITING PERIOD AFTER BANKRUPTCY TO QUALIFY FOR CONVENTIONAL LOAN
    • There is a 4 year mandatory waiting period after Chapter 7 Bankruptcy to qualify for a conventional loan
    • Mortgage Borrower needs re-established credit
    • No late payments in the past 12 months
    • Most lenders will have investor overlays where no late payments after bankruptcy will be necessary

Mortgage Part Of Chapter 7 Bankruptcy

  • Home Buyers with mortgage part of Chapter 7 Bankruptcy can qualify for conventional loans 4 years from the discharged date of their Chapter 7 Bankruptcy discharged date
  • Housing event needs to be finalized either through foreclosure, deed in lieu of foreclosure, short sale
  • There is no waiting period requirement after housing event
  • Borrower needs re-established credit and no late payments in the past 12 months
  • Many lenders will have lender overlays where they will require no late payments after bankruptcy

Home Buyers who need to qualify for mortgage with direct lender with no overlays on government and conforming loans, please can contact us at The Gustan Cho Team at Loan Cabin Inc. at 262-716-8151 or email us at gcho@gustancho.com.

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