Getting Mortgage After Short Sale: 2015 Guidelines

Previous homeowners who had a prior short sale can now qualify for a mortgage after short sale as long as they have met the mandatory waiting period after short sale.  Many homeowners have requested a short sale from their current mortgage lender as an option to avoid foreclosure.  A short sale is when a homeowner gets the blessing of their mortgage lender to sell their home below the amount of their mortgage balance because the value of their home is worth less than the balance of their mortgage loan balance.  Most mortgage lenders grant and approve short sales to homeowners who cannot afford their mortgage payments because it saves time and money of taking the homeowner through the foreclosure process.  Plus with short sale homes, lenders will get much more money from the sale of their asset than it would have through the foreclosure process.  The real estate collapse of 2008 have left millions of homeowners with underwater mortgages where their homes are worth significantly less than the balance of their mortgage loan.  Every year, there are approximately $400,000 short sale homes closed.  Each year, there are tens of thousands of previous short sale homeowners re-entering the housing market as new home buyers.  Home buyers can qualify to purchase a new home after a short sale, however, it depends on several factors.

Waiting Period For Mortgage After Short Sale: 2015 Update

All mortgage programs have different waiting period requirements to qualify for a mortgage after short sale.  For FHA insured mortgage loans, there is a three year mandatory waiting period to qualify for a mortgage after short sale.  The waiting period clock starts from the date of the short sale that is reflected on the HUD Settlement Statement.  If you have been current on your mortgage payment for 12 months up to the date of the short sale, there is no waiting period to qualify for a mortgage after short sale.  Unfortunately, most mortgage lenders will not approve a short sale unless you have skipped that last mortgage payment.  To this date, I have never ever seen a short sale homeowner who has been timely on their mortgage payment up to the date of the short sale, not because they did not or could not pay but was instructed by the mortgage lender that they needed to miss that last mortgage payment in order for them to do a final approval on the short sale.  The 12 month on time mortgage payments and all other payments of the short sale homeowner needed to have been current for 12 months up to the date of the short sale in order for the no waiting period after short sale to be effective.

Waiting Period After Short Sale On VA Loans

For VA Loans, there is a mandatory period of 2 years to qualify for mortgage after short sale.  Like FHA Loans, there is no mandatory waiting period to qualify for mortgage after short sale if the homeowner has been timely on their mortgage payments and all other payments for 12 months until the date of the short sale.

2015 Fannie Mae Waiting Period For Mortgage After Short Sale

Fannie Mae has announced new 2015 FANNIE MAE WAITING PERIOD GUIDELINES TO QUALIFY FOR MORTGAGE AFTER SHORT SALE.  2015 New Fannie Mae Guidelines on Waiting Period to qualify for a mortgage after short sale and deed in lieu of foreclosure is 4 years with 5% down payment.  The old Fannie Mae Guidelines with regards to waiting period to qualify for mortgage after short sale and/or deed in lieu of foreclosure was 2 years with 20% down payment.  This program is no longer in effect.  Fannie Mae waiting period requirements to qualify for a conventional loan after a foreclosure is 7 years from the date of the foreclosure.

2015 HUD And Fannie Mae Guidelines On Mortgage As Part of Bankruptcy

Great news from FHA and Fannie Mae for those homeowners who had their mortgage as part of bankruptcy.  For FHA Loans, if you had a mortgage as part of bankruptcy, the waiting period is 2 years from the discharge date of your bankruptcy.  For conventional loans, if you had a mortgage part of bankruptcy, the waiting period is 4 years from the discharge date of your bankruptcy and the minimum down payment required is 5%.

 Re-Established Credit Required Besides Waiting Period

Besides meeting the mandatory waiting period, both HUD and Fannie Mae require that mortgage loan applicant has not had any late payments after a bankruptcy, deed in lieu of foreclosure, short sale, or foreclosure.  Mortgage lenders want to see re-established credit and perfect payment history.  Overdrafts in the past 12 months is not allowed.  Verification of Rent, VOR, is required by many mortgage lenders and is a great compensating factor.  If you had a prior short sale and need to qualify for a mortgage loan, please contact me at 262-716-8151 or visit me at www.gustancho.com.

Related> Mortgage after Short Sale

Related> One year waiting period after bankruptcy and foreclosure

Related> New Fannie Mae Guidelines on waiting period after short sale and deed in lieu

Related> New Fannie Mae Guidelines on Conventional Loans

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.

9 Comments

  1. Jennifer says:

    I need a loan to do 1031 exchange on investment property. Loan around 650 with 20 percent down. Short sale dec 2013

    • Gustan Cho says:

      There is a four year waiting period after a short sale and/or deed in lieu of foreclosure to qualify for any conventional loan. There may be alternative financing that I may help you with such as private money loans or hard money loans. Please contact me at 262-716-8151 to discuss other alternative financing.

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  5. Dean says:

    I missed three payments on my mortgage and had a shortsale in 2010. I want to buy a house again, and am qualified for 15 yr FHA with 22% down. Just found out that MIP is now mandatory on all FHA.
    Can I still qualify for conventional loan, possibly 15 yr 20% down?
    What would my DTI have to be?

    • Gustan Cho says:

      If you had a short sale in 2015, you can qualify for both a FHA Loan with 3.5% down payment as well as a conventional loan with 5% down payment. It is up to you whether you choose the 15 year fixed rate mortgage or 30 year fixed rate mortgage on either FHA Loan or conventional loan. 15 year mortgage rates have lower mortgage interest rates than 30 year fixed rate mortgage loan programs on both FHA Loans and Conventional Loans. Debt To Income Ratio requirements on FHA Loans are 56.9% DTI if your credit scores are 620 FICO or higher and 43% if your credit scores are under 620 FICO. Minimum credit scores to qualify for FHA Loans are 580 FICO for a 3.5% down payment FHA insured mortgage loan. You can qualify for FHA Loans with under 580 FICO credit scores but you would need 10% down payment. All FHA Loans require FHA mortgage insurance premiums. 30 Year FHA Loans FHA Mortgage Insurance Premium is set at 0.85% annual FHA Mortgage Insurance Premium and with 15 Year FHA Loans the FHA Annual Mortgage Insurance Premium is 0.45%. All FHA Loans require upfront FHA Mortgage Insurance Premium of 1.75%, a one time fee which can be added on the balance of the FHA Loan. Mandatory waiting period to qualify for FHA Loan after a short sale is 3 year waiting period and mandatory waiting period to qualify for a Conventional Loan after a short sale is four years from the date of short sale. Conventional Loans with less than 20% down payment require private mortgage insurance which is paid by the borrower. Conventional Loan Borrowers do not have to pay private mortgage insurance with less than 20% down payment if they choose Lender Paid Mortgage Insurance, also called LPMI, which is available to conventional loan borrowers in lieu of a slightly higher conventional mortgage interest rate. From what you stated, you should be set to go. Please call me at 262-716-8151 or email me at GLCProperties@aol.com if you have any additional questions. Hope this response answers all of your questions.

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