Qualifying For FHA Loan After Short Sale

Homeowners with a prior short sale can qualify for a FHA Loan After Short Sale as long as they meet the mandatory waiting period after the short sale and re-established credit. Most mortgage lenders do not want to see the mortgage loan borrower with any late payments or derogatory credit after their short sale and do expect re-established credit and at least three credit tradelines that has been seasoned for at least 12 months. To qualify for a FHA Loan After Short Sale, the mortgage loan borrower needs to wait three years from the date of the short sale. Just because you have waited out the 3 year mandatory waiting period after short sale does not automatically qualify you for a FHA Loan After Short Sale. We will cover more on qualifying for FHA Loan After Short Sale in a later paragraph.

What Is A Short Sale?

A short sale is when a homeowner has a home that is worth less than amount of the balance of their mortgage loan and has the mortgage lender’s blessing to sell their home below what they owe and in lieu the mortgage lender will not come after the homeowner for the deficiency. Just because you own a home that is worth less than the amount of your mortgage balance does not automatically guarantee you that your mortgage lender will approve a short sale on your home. There is a process involved with getting a short sale approved by your mortgage lender. Your mortgage lender will want to see your financials and want to see that you are financially distressed and cannot afford your mortgage payments either due to loss of employment, new employment with less pay, or other extenuating circumstances such as divorce or medical issues. If you have plenty of assets and good income and good credit and want to do a short sale just because your home is underwater, mortgage is higher than the value of your home, the mortgage lender will not approve your short sale. A short sale application takes time and most short sale homes take much longer to close. Everything from pricing and listing your home, to purchase offers, to the mortgage approval process all need the mortgage lender approval on a short sale. If the home buyer of the short sale home needs an extension to the closing date, the seller of the home has no say so and needs the mortgage lender’s approval. Mortgage lenders do not get back right away. Mortgage lenders normally take their time. Normal real estate purchase transactions take 30 to 45 days to close. However, with short sales, closings can take 3 to 6 months if not longer due to the red tape the mortgage lender.

Getting Pre-Approved For FHA Loan After Short Sale

As mentioned earlier, you need to meet the mandatory three year waiting period after a short sale to qualify for a FHA Loan After Short Sale. However, just waiting out the mandatory three year waiting period after a short sale does not automatically qualify you for a FHA Loan. FHA mortgage lenders want to see re-established credit after short sale from the mortgage loan borrowers and no late payments after short sale. For example, if you had a short sale three years ago and had several late payments in the past 12 months recently, I can guarantee you that no FHA mortgage lender in this planet will approve you for a FHA Loan. Mortgage lenders understand that consumers go through periods of bad credit due to extenuating circumstances such as unemployment, loss of business, divorce, or medical reasons. But people that go through tough financial times do recover and what mortgage lenders want to see from mortgage loan borrowers when they recover is that they have re-established credit and are making their monthly credit payments on time. One thirty day late payment on a consumer’s credit report can plummet their credit scores at least 50 or more FICO points and that late payment history will stay on their credit report for a period of 7 years.

Is There Anything I Need To Worry About Qualifying For FHA Loan After Short Sale?

As long as you have passed the mandatory three year waiting period after short sale, have solid full time employment with verifiable income, at least a 580 FICO credit score, no late payments after your short sale, and re-established credit after your short sale, you should not be concerned and you should definitely qualify for a FHA Loan. If you are looking for a FHA mortgage banker with no lender overlays, please contact us at 262-716-8151 or email us at gcho@gustancho.com. We are available 7 days a week, weekends and holidays as well. You can also go APPLY ONLINE by clicking APPLY NOW .


The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

Comments are closed.