Conventional Loan After Short Sale Versus Foreclosure Guidelines

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Conventional Loan After Short Sale Versus Foreclosure Guidelines Was UPDATED And PUBLISHED On May 2nd, 2020

What is the difference between a conventional short sale loan and exclusion guidelines

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

In this article, we will discuss and cover Conventional Loan After Short Sale Versus Foreclosure Guidelines.

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 in 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

What are the benefits of short selling?

Short sales are 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 have a 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 the 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, a 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 have 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.

Benefits Qualifying For A Conventional Loan After Short Sale Versus Foreclosure

What are the benefits that qualify for a traditional short sale loan and foreclosure

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 Gustan Cho Associates Mortgage Group at 800-900-8569 or text us for a faster response. Borrowers can also email us at gcho@gustancho.com. Gustan Cho Associates has no overlays on government and conventional loans. All of our pre-approvals are full credit loan commitments that are fully underwritten and signed off by our mortgage underwriters. We close 100% of all of our pre-approvals. Our national team of licensed loan officers at The Team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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