Fannie Mae Guidelines Mortgage After Short Sale And Deed In Lieu

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Fannie Mae Guidelines Mortgage After Short Sale And Deed In Lieu

Updated Fannie Mae Guidelines Mortgage After Short Sale And Deed In Lieu Was UPDATED On September 7th, 2018

what are Fannie Mae Guidelines Mortgage After Short Sale And Deed In Lieu

Fannie Mae Guidelines Mortgage After Short Sale requires a four year waiting period after the date of the short sale.

  • A short sale is an alternative to foreclosure
  • Short Sales is often offered to homeowners who have mortgage balances which are higher than the market value of their homes by their existing lenders
  • A short sale is highly recommended for homeowners who can no longer afford their mortgage payments and cannot sell their home
  • Reasons why they cannot sell their homes is because of having loan balances that is higher than the appraised value of their home
  • A short sale needs to get approved by the homeowners mortgage lender
  • Normally takes some time to get a short sale approved and closed

How Does The Short Sale Process Work?

How Does The Short Sale Process Work?

The 2008 Real Estate And Mortgage Meltdown has left millions of homeowners with upside mortgages where the mortgage balance of their home loan was higher than the value of their properties.

  • Since the Great Recession of 2008, real estate values have recovered in most parts of the United States
  • However, there are still homeowners who are underwater
  • Underwater mortgages is when the homeowners mortgage loan balance is higher than the value of their homes
  • The only way these homeowners with underwater mortgages can sell their homes and move on is by coming up with the difference of the mortgage loan balance and the property value
  • Most folks cannot come up with the difference
  • Homeowners who have lost their jobs or businesses due to the Great Recession and can no longer afford their housing payments could not sell their homes
  • Short sale was an alternative to foreclosure
  • Many lenders want to avoid foreclosure
  • Lenders will offer the homeowners who can no longer afford to keep their homes foreclosure alternatives such as deed in lieu of foreclosure or short sale
  • A homeowner who is offered a short sale by their lender sells the home at a price below the mortgage balance amount
  • In return, the lender will not go after the deficit and forgive the debt

Short Sale Process Versus Traditional Home Buying & Selling Process

what is Short Sale Process Versus Traditional Home Buying & Selling Process

 

The short sale process is like any home selling process.

  • The only exception is that the home seller needs to get permission by the lender on the selling price of the home
  • The homeowner gets to choose the realtor of their choice
  • The lender needs to approve the listing price of the short sale home
  • If there is an offer on the short sale home, the lender needs to approve the price and sign the real estate purchase contract as the seller
  • Short sale homes take much longer to close than regular homes due to the slowness of the bank

Fannie Mae Guidelines On Mortgage After Short Sale: Qualifying For Conventional Loan

what are Fannie Mae Guidelines On Mortgage After Short Sale: Qualifying For Conventional Loan

Homebuyers with a prior short sale can now qualify for a conventional mortgage four years after the short sale. The waiting period start date is the short sale date which is on the HUD-1 Settlement Statement.

  • A short sale will plummet credit scores
  • However, as short sale on credit reportages, the short sale will have less and less of an impact on credit scores
  • Credit scores will eventually go back up where the short sale will have little to no impact on credit scores
  • Qualifying for conventional loan after short sale requires no late payment history after the short sale
  • Conventional lenders want to see borrower has re-established credit after short sale and timely payments
  • Minimum credit scores required to qualify for a conventional loan is 620
  • Conventional Loans are very credit score sensitive unlike FHA Loans
  • The higher borrowers credit scores are the lower mortgage rates will be
  • To get the best available conventional mortgage interest rates, borrowers should have credit scores of 740 or higher
  • Every 20 point drop from 740, there will be a pricing adjustment on mortgage interest rates

What If You Are Told You Do Not Qualify For Conventional Loan 4 Years After Short Sale?

What If You Are Told You Do Not Qualify For Conventional Loan 4 Years After Short Sale?

Just because you have descent credit scores and have met the 4 year waiting period after short sale does not mean that all conventional lenders will approve borrowers for a conventional mortgage loan.

  • There are many lenders that have mortgage lender overlays on conventional loans after short sale
  • Mortgage lender overlays are lending guidelines that are set by individual mortgage lenders that surpass the minimum conventional mortgage lending guidelines and standards of Fannie Mae and Freddie Mac

Here are the Fannie Mae guidelines on mortgage after short sale for borrowers needing a conventional loan.

  • 4 year waiting period after short sale
  • The waiting period clock starts from the date of the short sale which is reflected on the HUD-1 Closing Statement.
  • Minimum credit scores of 620
  • Minimum 5% down payment for home purchase
  • 3% down payment is available by Fannie Mae on a conventional loan purchase but is limited to first time home buyers
  • 3% down payment on conventional loans on a home purchase is available with Freddie Mac for home buyers who did not have any home ownership in the past 3 years
  • Otherwise, minimum 5% down payment is required on a conventional home purchase mortgage loan
  • Maximum debt to income ratio of 50% DTI

Fannie Mae Guidelines On Mortgage After Short Sale: Lender Overlays

what are Fannie Mae Guidelines On Mortgage After Short Sale: Lender Overlays

Many banks and conventional mortgage lenders have mortgage lender overlays.

  • Some banks and lenders will require a 5 year waiting period or more after short sale to qualify for conventional loan after short sale even though Fannie Mae Guidelines Mortgage After Short Sale is four years
  • Many lenders will require minimum amount of credit tradelines
  • Some mortgage lenders may require 3 to 5 credit tradelines that has been seasoned for two years
  • Other mortgage lender overlays include higher credit scores than the minimum 620 credit scores required by Fannie Mae
  • Other lenders will require verification of rent

Home Buyers looking to qualify for a conventional loan after short sale and need a national direct lender with no overlays, please contact us at The Gustan Cho Team at Loan Cabin Inc. at 262-716-8151 or email me at gcho@gustancho.com. We do not have any overlays on conventional loans and as long as borrowers meet the minimum Fannie Mae and/or Freddie Mac lending guidelines, we can approve and close on your conventional mortgage loan.

This BLOG On Fannie Mae Guidelines Mortgage After Short Sale Was UPDATED On September 7th, 2018

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