Conventional Mortgage After Short Sale And Deed In Lieu

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Conventional Mortgage After Short Sale And Deed In Lieu

This BLOG On Conventional Mortgage After Short Sale And Deed In Lieu Was UPDATED On May 5th, 2019

Homeowners who have had a deed in lieu of foreclosure or a shortsale can qualify for Conventional Mortgage After Short Sale And Deed In Lieu after 4 year waiting period.

  • The 4 year waiting period start clock starts from the recorded date of the deed in lieu and/or short sale date
  • The waiting period is extended to 7 years after standard foreclosure to qualify for Conventional Loans
  • There is a mandatory 3 year waiting period after the recorded date of foreclosure/deed in lieu to qualify for USDA And FHA Loans
  • There is a two year waiting period after the recorded date of foreclosure/deed in lieu and/or short sale to qualify for VA Loans
  • Fannie Mae and Freddie Mac changed the 2 year mandatory waiting period after a deed in lieu of foreclosure or short sale for a conventional loan with 20% down payment is no longer valid

Waiting Period Requirements On Conventional Mortgage After Short Sale And Deed in Lieu

Fannie Mae waiting period after a deed in lieu of foreclosure or short sale guidelines will allow a mortgage loan borrower to qualify for a mortgage loan after 4 years from the date of the deed in lieu of foreclosure or a short sale with 5% down payment. Re-Established credit and no late payments are normally required. One or two late payments after a housing event and/or bankruptcy is not a deal killer.

Qualifying For Conventional Mortgage After Short Sale And Deed In Lieu

One of the many mistakes potential homeowners make is that they take for granted that they will automatically qualify for a conventional mortgage loan if they had a prior deed in lieu of foreclosure or a short sale.

  • Home Buyers can qualify for Conventional Mortgage After Short Sale And Deed In Lieu if they meet the 4 year waiting period
  • Fannie Mae and/or Freddie Mac set the conforming guidelines with requirements on the waiting period for a conventional mortgage after short sale and deed in lieu of foreclosure
  • Just because the four-year waiting period has elapsed, it does not automatically insure conventional mortgage approval
  • The borrower needs an automated underwriting approval by Fannie Mae and/or Freddie Mac.
  • Not everyone gets an approved eligible per AUS FINDINGS
  • Mortgage Applicants needs to meet other Conventional Mortgage Guidelines.
  • The automated underwriting system will evaluate all other aspects of borrowers credit, assets, liabilities, and income

Automated Findings On Automated Underwriting System

The automated underwriting system is like a brain and takes into account every aspect of the mortgage loan applicant.

  • Automated Underwriting System analyzes the following in a matter of seconds:
    • Credit scores
    • Past delinquencies
    • Bankruptcy if any
    • Foreclosures if any, tax liens if any
    • Payment history, late payments
    • Charge offs if any
    • Debt to income ratio, judgments
    • Payment plans
    • Forbearance
    • Employment history
    • Assets, liabilities
    • Other factors are taken into consideration by AUS prior to issuing automated approval.
  • The automated underwriting system will be more selective in approving those who have had a prior deed in lieu of foreclosure or short sale right after the 4-year mark
  • Chances of approval might be greater as more time elapses

Approve/Eligible Per Automated Findings

  • The lender will only approve a mortgage loan borrowers 4 years after a deed in lieu of foreclosure or short sale
  • Approved eligible findings from the automated underwriting system is required
  • Although borrowers have exceptional credit, asset, and income, they still need an approved eligible from the Fannie Mae automated underwriting system
  • Another option borrowers might have is to have a lender who is willing to do a manual underwrite which not many will do manual underwriting on conventional loans

Other Factors

I strongly recommend that home buyers do not enter into a real estate purchase contract on a home until they wait out the 4-year waiting period.

  • I have seen too many cases where home buyers get antsy
  • They enter into purchase contracts prior to the 4-year waiting period and stress out
  • Can it be done? 
  • Of course but there is no guarantee

Update On Conventional Loan After Deed In Lieu And Short Sale

The two year mandatory waiting period after a deed in lieu of foreclosure or short sale with a 20% down payment on a home purchase is no longer in effect.

  • Fannie Mae and Freddie Mac extended the waiting period to qualify for a conventional loan after a deed in lieu of foreclosure and/or short sale to a four year waiting period with a minimum of 5% down payment.

Mortgage Loan Applicants with any questions on waiting period after a deed in lieu of foreclosure or short sale, please contact us at 262-716-8151 or text us for faster response. Our email is gcho@gustancho.com.

Gustan Cho NMLS ID 873293

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