How Can You Qualify For Home Loan After Short Sale

This Article On Qualifying For A  Home Loan After Short Sale Was Written By Julie Hayward

Home Loan After Short Sale: Q&A with Julie Hayward, guest writer for Gustan Cho Associates Mortgage & Real Estate Information Resource Center and President and Managing Broker for Chicago based EDGE REALTY LLC

I have particular passion for and expertise in short sales. In my career as a full time Illinois real estate agent, I have enjoyed handling the complexities in these sales and in helping people affected by them rebuild their lives. I’m happy to share here some answers to common questions.

  • Question: I am behind on my mortgage and unable to catch up. What can I do?
  • You could ultimately continue not to pay and the property will go into foreclosure. The bank will serve you notice and an auction is scheduled. Once the property is sold at auction you will have approximately 45-90 days to vacate the property.
  • Question: I am not behind on my mortgage yet but I can’t afford to keep the property. However, what I owe is more than the property is worth. Should I consider a short sale?
  • The benefit to opting for a short sale instead of foreclosure is that doesn’t wreak as much havoc on your credit and it gives you more time in the home. As long as you have a contract on the property, in most cases, the lender will not schedule an auction since they are working on negotiating the transaction with a current buyer. This takes time, usually longer than 45-90 days, and in some cases up to two years.

Delays In The Short Sale Process

There are several reasons for this lengthy time frame. Some home buyers get tired of waiting during the approval period. Other buyers think they can find a steal in buying a short sale, and when the bank comes back with a counteroffer they dislike, they walk away. Sometimes the lender has a lot of inventory in a particular area and is not adequately staffed to meet demand. When this is the case, the files sit on a desk until someone gets to them. There are more reasons but those above are the most common reasons for delay in a short-sale transaction.

Qualifying For Home Loan After Short Sale Versus Foreclosure

There are other benefits to your credit in going through a short sale and qualifying for a Home Loan After Short Sale. You can buy another property sooner if you are going to get a conventional loan. Here are the qualifying factors in qualifying for a Home Loan After Short Sale with a Conventional Loan:

  • There is a four year waiting period to qualify for a Conventional Loan After Short Sale and/or Deed in Lieu under Fannie Mae and Freddie Mac Guidelines
  • There is a seven year waiting period to qualify for a Conventional Loan after a foreclosure
  • There will not be a deficit judgment on a short sale versus a foreclosure where on a foreclosure the lender can sue you for the loss
  • A prior short sale has no impact on mortgage rates. Things that determine your mortgage rates on Conventional Loans are credit scores, Loan To Value, and type of property the borrower is buying
  • Minimum credit scores to qualify for a Conventional Loan is 620 FICO and a short sale

You see that you can qualify for a Conventional Home Loan After Short Sale in four years where the waiting period is seven years to qualify for a Conventional Loan after a standard foreclosure.

Foreclosure could affect your credit more than a short sale if there was a deficiency, especially if it is still outstanding. If you can’t repay it could put you into bankruptcy. Some people don’t see the difference between a foreclosure and a short sale but in the long run, it can make a big difference with Conventional Loans but not government loans like FHA, USDA, and VA Loans.

Qualifying For FHA & USDA Home Loan After Short Sale

You can qualify for a FHA Home Loan After Short Sale. Here are the qualification requirements to qualify for a FHA Home Loan After Short Sale:

  • Minimum credit score of 580 FICO
  • Three year waiting period after the short sale date that is reflected on the HUD-1 Settlement Statement
  • A prior short sale has no negative effect on the mortgage rates you will get. Mortgage rates are determined by your credit scores and the type of property you are buying with FHA Loans
  • There is a three year waiting period to qualify for a FHA after the recorded date of a foreclosure and/or deed in lieu of foreclosure.
  • FHA treats short sales, foreclosures, and deed in lieu of foreclosures all the same
  • USDA Loans have the same three year waiting period to qualify for USDA Loan after short sale, deed in lieu, and foreclosure like FHA Loans

Qualifying For VA Home Loan After Short Sale

You can qualify for a VA Home Loan After Short Sale as long as you meet the minimum mandatory waiting period. Here are the VA Guidelines After Short Sale:

  • A Veteran Borrower can qualify for a VA Home Loan After Short Sale after 2 year waiting period after the date of the short sale
  • A Veteran Borrower with a Certificate of Eligibility, COE, can qualify for a VA Home Loan After Foreclosure and/or Deed in Lieu of Foreclosure after two years after the recorded date of the foreclosure and/or deed in lieu of foreclosure
  • Minimum credit scores to qualify for a VA Loan is 580 FICO credit scores
  • VA Loans do not have any debt to income ratio requirements as long as the borrower can get an approve/eligible per AUS, Automated Underwriting System
  • A prior short sale does not play any impact on mortgage interest rates. Only credit scores and the type of property will determine the borrower’s mortgage rates on VA Loans

Qualifying For Home Loan After Short Sale With NO WAITING PERIOD With Non-QM Loans

Non-QM Loans are specialty mortgage loan programs which are portfolio loans and have no waiting period after short sale to qualify for home loan. Here is how NON-QM Loans work:

  • Portfolio Loans which are held by the lender and not sold to Fannie Mae and/or Freddie Mac
  • Minimum 10% down payment but 20% down payment may be required for borrowers with under 680 FICO Credit Scores
  • No waiting period after short sale, foreclosure, or deed in lieu of foreclosure with NON-QM LOANS

 

About The Author: Julie Hayward

Julie Hayward is the author of this article, Home Loan After Short Sale, and a guest writer for Gustan Cho Associates Mortgage & Real Estate Information Resource Center. Julie Hayward is also the President and Managing Broker for Chicago headquartered EDGE REALTY LLC. Julie is also the wife of prominent Chicago based Attorney Chad M. Hayward.  Julie Hayward has extensive experience working at The Law Offices of Chad Hayward which is a full service law firm with a large percentage of their law practice dedicated to real estate and bankruptcy law. Chad Hayward has dozens of law offices throughout the Chicagoland Area and in six counties of Northern Illinois:

  • Chicago and Surrounding Suburbs of Chicago, Illinois
  • Cook County
  • Lake County
  • Will County
  • Kane County
  • Du Page County
  • Mc Henry County

Julie Hayward is an expert in short sales and is an expert negotiator dealing with lenders. Julie Hayward is also a real estate consultant to the loan officers at The Gustan Cho Team at Cross Country Mortgage. If you have any questions in short sale or are interested in buying a short sale home or  listing your home via short sale and need help in dealing with your lender, contact Julie Hayward at 312-504-9228 or email Julie at juliehayward04@gmail.com. Julie is a five star realtor who is an expert in dealing with first time home buyers. Julie Hayward is also the author of OPPORTUNITY KNOCKS, her first book that will be released in the upcoming weeks.

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.

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