Qualifying For Conventional Loan After Short Sale Versus Foreclosure

Qualifying For Conventional Loan After Short Sale Versus Foreclosure

This BLOG On Qualifying For Conventional Loan After Short Sale Versus Foreclosure Was UPDATE On February 11th, 2018

Since 2008, millions of Americans have witnessed their equity in their homes evaporate.

  • The Real Estate and Credit Meltdown of 2008 has devastated many hard working families
  • The Great Recession of 2008 was more of a Depression than the Great Recession
  • Record bankruptcies, foreclosures, and short sales were documented like no other time in U.S. history
  • A substantial percentage of homeowners owned homes with mortgage balances higher than the value of their properties
  • I know of hundreds of homeowners whose values have plummeted and owed more on their mortgage balance than what their homes were worth

Government Intervention With HARP

The government created the Home Affordable Refinance Program, also known as HARP. Although the government created the HARP streamline refinance program for homeowners who had upside down mortgages,  it only applied to lenders who had  sold their loans to FANNIE MAE or FREDDIE MAC prior to May 31, 2009.

  • If they have a regular conventional loan and their lender did not sell their loan to FANNIE MAE or FREDDIE MAC, these borrowers did not qualify for the HARP program
  • Homeowners who are currently in default on their mortgage and are contemplating foreclosure or short sale need to think of the future
  • It is much easier to qualify for Conventional Loan After Short Sale Versus Foreclosure

We will discuss this topic later on this article.

Short Sale Process

The reason below is why homeowners go through foreclosure or short sale:

  • Loss of business or job loss
  • There are homeowners who still have teaser rates where they have increasing rates where they can no longer afford their monthly mortgage payments
  • Self employed borrowers who cannot make ends meet and pay all of their bills due to substantial loss of revenues due to economy
  • Home values have not recovered yet from the 2008 market collapse

Benefits With Short Sale

Short sales is when a mortgage lender will let the borrower list and sell their home below what they owe on their mortgage balance. Lenders will take the loss between the balance owed and the sales price of the home. The Federal Housing Finance Agency (FHFA) regulates Fannie Mae and Freddie Mac. Conventional Loans are called Conforming Loans because they need to Conform to Fannie Mae and/or Freddie Mac Guidelines. Fannie Mae and Freddie Mac has mandatory waiting period to qualify for Conventional Loans after the following:

  • Chapter 7 Bankruptcy
    • 4 year waiting period after Chapter 7 Bankruptcy discharged date
  • Chapter 13 Bankruptcy
    • 2 year waiting period after Chapter 13 Bankruptcy discharged date
    • 4 year waiting period after Chapter 13 dismissal date
  • Foreclosure
    • 7 year waiting period after foreclosure recorded date to qualify for conventional loans
  • Deed In Lieu Of Foreclosure
    • 4 year waiting period after recorded date of deed in lieu of foreclosure
  • Short Sale
    • 4 year waiting period after short sale date to qualify for conventional loans

Below is what may happen during and after a short sale of a home:

  • A) Most lenders will not go after the homeowner on a deficit of the mortgage
  • B) The lender will write off the loss on their books will send the borrower notice on the charged off amount and/or deficit or loss the lender took from the short sale

Homeowners Facing Foreclosure

Most lenders will give the option of a short sale or deed in lieu of foreclosure rather than foreclosure.

  • There is a huge difference in qualifying for Conventional Loan After Short Sale Versus Foreclosure
  • The impact of foreclosure, deed in lieu of foreclosure, short sale is the same to qualify for FHA Loans but not Conventional Loans

Qualifying For Conventional Loan After Short Sale Versus Foreclosure

As mentioned earlier, the waiting period is shorter to qualify for Conventional Loan After Short Sale Versus Foreclosure.

Fannie Mae and Freddie Mac has the following waiting period requirements to qualify for Conventional Loan After Short Sale Versus Foreclosure:

  • There is a four year waiting period to qualify for Conventional Loans After Short Sale and/or Deed in Lieu of Foreclosure
  • There is a seven year waiting period to qualify for Conventional Loans After Foreclosure
  • There is a four year waiting period to qualify for Conventional Loans After Chapter 7 Bankruptcy
  • There is a two year waiting period to qualify for Conventional Loans After Chapter 13 Bankruptcy discharged date
  • If you have a mortgage or mortgages part of Chapter 7 Bankruptcy and it has been discharged, the waiting period is four years to qualify for Conventional Loans

Qualifying for Conventional Loan After Short Sale Versus Foreclosure has its benefits in its reduced waiting period requirement. If you have further questions in qualifying for Conventional Loans, please contact The Gustan Cho Team at USA Mortgage at 262-878-1965 or text Gustan for faster response at 262-716-8151. Mortgage Borrowers can also email us at gcho@usa-mortgage.com. The Gustan Cho Team at USA Mortgage has no mortgage overlays on government and conventional loans. All of our pre-approvals are full credit loan commitments that is fully underwritten and signed of by our mortgage underwriters. We close 100% of all of our pre-approvals. Our national team of licensed loan officers at The Gustan Cho Team at USA Mortgage is available 7 days a week, evenings, weekends, and holidays.

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