This  guide covers conventioal loan after short sale vs foreclosure 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 vs foreclosure guidelines.

Conventional Loan After Short Sale vs Foreclosure: 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.

There are differences in waiting periods and eligibility criteria when considering a conventional loan after a short sale versus a foreclosure. A short sale is when a homeowner sells their home for less than the outstanding mortgage balance with the lender’s approval. Typically, the period for obtaining a conventional loan after a short sale is shorter than a foreclosure.

Waiting Period on Conventional Loan After Short Sale vs Foreclosure

The waiting period can vary but is generally around two to four years, depending on the lender’s guidelines and the borrower’s financial situation. Borrowers may need to demonstrate that they have reestablished credit, stable income, and meet other lender requirements. Some lenders may offer more favorable terms to borrowers with a history of a short sale compared to a foreclosure.

Foreclosure is the legal process through which a lender repossesses a property due to the borrower’s failure to make mortgage payments.

The period for obtaining a conventional loan after a foreclosure is typically longer than after a short sale. The waiting period can range from three to seven years, depending on factors such as the borrower’s credit score, the down payment amount, and the lender’s policies. Borrowers may face stricter scrutiny and requirements to qualify for a loan after a foreclosure, including a more substantial down payment and higher interest rates. Rebuilding credit and demonstrating financial stability are crucial for borrowers seeking a conventional loan after a foreclosure.   Click here to get approval for conventional loan after short sale

How a Housing Event Impact Conventional Loans

While both short sales and foreclosures can impact a borrower’s ability to qualify for a conventional loan, the waiting period and eligibility criteria are generally more favorable for those with a history of a short sale. However, the approval process can influence individual circumstances, lender policies, and market conditions. Borrowers must consult with mortgage professionals to understand their options and requirements based on their situation. 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 vs foreclosure. We will discuss this topic throughout this guide.

Conventional Loan After Short Sale vs Foreclosure: 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 Conventional Loan After Short Sale vs Foreclosure

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 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.

Conventional Loan After Short Sale vs Foreclosure and Deed-in-Lieu

There is a 4 year waiting period after the recorded date of deed in lieu of foreclosure.

Conventional Loan After Short Sale vs Foreclosure

There is a 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: Most lenders will not go after the homeowner on a deficit of the mortgage. The lender will write off the loss on their books will send the borrower notice on the charged-off amount 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 vs 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 vs Foreclosure

As mentioned earlier, the waiting period is shorter to qualify for conventional loan after short sale vs foreclosure. Fannie Mae and Freddie Mac have the following waiting period requirements to qualify for conventional loan after short sale vs foreclosure: There is a four-year waiting period to qualify for conventional loans after short sale or deed-in-lieu of foreclosure. There is a seven-year waiting period to qualify for conventional loan 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.  Qualify for conventional loan after short sale vs foreclosure 

Benefits Qualifying For a Conventional Loan After Short Sale vs Foreclosure

Qualifying for conventional loan after short sale vs 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 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.