In this blog, we will cover and discuss when is the best date to qualify for a mortgage after a short sale. Homeowners who had a prior short sale can qualify for a mortgage loan after the short sale. This holds true as long as they meet the mandatory waiting period after a short sale. Lenders expect re-established credit after a short sale. HUD, the parent of FHA, requires a mandatory waiting period of 3 years from the date of the short sale for a borrower to qualify for an FHA loan. Both Fannie Mae and Freddie Mac mandate a four-year waiting period after a short sale to qualify for a Conventional Loan. In this article, we will discuss and cover mortgage after short sale waiting period to qualify for a new home loan.
What Is A Short Sale?
A short sale is when a homeowner has a home in which the mortgage loan balance is higher than the value of the property. The homeowner gets the lender’s permission to sell their home for below the amount they owe the mortgage lender in lieu of foreclosure. The mortgage lender will take a hit on the amount owed. But will save time and the headache of foreclosure proceedings. After the 2008 economic collapse in the United States, many home prices plummeted.
How Long After Short Sale Can I Buy Again?
Millions of homeowners had homes where their mortgage loan balances were much higher than the value of their homes. A short sale is an alternative to foreclosure. A short sale is like any other home sale except the homeowner cannot profit from it and can stay in their homes until they close on their short sale. A homeowner who is going through a short sale can hire any realtor he or she wants but will need permission on the actual price accepted by the lender. Short sales are still common.
FHA Mortgage After Short Sale Waiting Period
A homeowner who had a prior short sale can qualify for an FHA loan 3 years after the short sale date which is reflected on their closing statement, also known as the HUD 1 Settlement Statement. Besides the waiting period requirements, mortgage lenders want to see no late payments from the mortgage loan applicant and re-established credit. The minimum credit score required to qualify for a 3.5% down payment FHA mortgage after a short sale is 580 FICO. A home buyer with a prior short sale can qualify for an FHA loan with credit scores under 580 FICO. However, a 10% down payment is required for home buyers with credit scores below 580 FICO. Verification of Rent may be required for mortgage loan applicants with credit scores below 600 FICO credit scores.
Conventional Mortgage After Short Sale Waiting Period
Homebuyers who had a prior short sale can now qualify for a Conventional Mortgage after Short Sale after a 4-year waiting period. The waiting period start date is from the date of the short sale which is reflected in the closing statements of their short sale, also known as the HUD-1 Settlement Statement. Just passing the mandatory waiting period does not automatically qualify you for a conventional loan. Conventional loan lending guidelines are much stricter than FHA loan lending guidelines. The minimum credit score required for a conventional loan is 620 FICO. To get the best mortgage rates for a conventional loan, higher credit scores are required. The lower your credit scores are the higher your conventional mortgage rates will be. Par pricing for prime borrowers on conventional loans is 740 FICO credit scores and a 20% down payment.
3% Down Payment On Conventional Loans
Fannie Mae and Freddie Mac re-implemented the 3% down payment home purchase conventional mortgage loan program for first-time home buyers. First-time home buyers can now put only a 3% down payment on a home purchase with a conventional loan. Previous homeowners can also qualify for the 3% down payment home purchase program as long as they did not own a home in the past 3 years. Otherwise, the minimum down payment required on conventional loans is a 5% down payment. Veteran and seasoned homeowners need the 5% minimum down payment on a conventional loan home purchase. If you have less than a 20% down payment or a loan to value high than 80% LTV on conventional loans, it requires private mortgage insurance.
This blog on mortgage after short sale waiting period was updated on July 31st, 2022
July 31, 2022 - 3 min read