Purchase contract prior to your waiting period being over
If you have a prior bankruptcy, there is a two year waiting period before you are eligible of getting an automated approval by Fannie Mae’s Automated Underwriting System. If you have a foreclosure, deed in lieu of foreclosure, or short sale, there is a mandatory waiting period of 3 years to be eligible for a FHA loan via Fannie Mae’s Automated Underwriting System. If you have a deed in lieu of foreclosure or a short sale, you are eligible for an automated approval via Fannie Mae’s Automated Underwriting System for a conventional loan if and only if you can come up with a 20% down payment. Many home buyers get antsy and start looking for a home about six months or earlier prior to their waiting period is over. Shopping for a home is fine but entering into a purchase contract can be a risky move. Most sellers will want to close on the sale of their home no later than two months from the date they enter into a purchase contract. The problem this creates is that your mortgage broker cannot work on your mortgage application until he gets an automated approval from Fannie Mae’s Automated Underwriting System. On another note, just because the waiting period has passed does not mean that you are guaranteed an automated approval.
Do not assume that your will automatically be guaranteed an automated approval
You should not automatically assume that you will get a guaranteed automated approval via Fannie Mae’s Automated Underwriting System just because you have passed the waiting period. The Automated Underwriting System is a sophisticated computer system that will take into effect your income, debts, liabilities, credit scores, and your credit pattern from the date of your bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. The Automated Underwriting System will especially pay special attention to see whether you have three established credit trade lines for at least a year and will watch for late payments. It will analyze every item you wrote on your mortgage application before it renders an automated approval.
Make sure you have an iron clad purchase real estate contract
If you decide on entering into a real estate purchase contract make sure you have an iron clad real estate contract where you can get your earnest money back in the event of a mortgage denial. It will be up to you whether or not to hire home inspectors, pest inspectors, or other specialty inspectors prior to your automated approval. You need to realize that your mortgage application will remain in idle mode until your waiting period has elapsed.