Waiting Period On Short Sale For New Mortgage Qualification

Home Loan After Short Sale

Qualifying For Home Loan After Short Sale

There are mandatory waiting periods to apply for a new mortgage loan if you had a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.  If you had a bankruptcy, the waiting period is two years if you want to apply for a FHA purchase loan.  The waiting period is three years if you had a foreclosure for you to qualify for a FHA mortgage loan.  FHA treats deed in lieu of foreclosure and short sales the same as a regular foreclosure so the waiting period for these will be the mandatory three year waiting period.

Deed in lieu of foreclosure and short sale waiting period

If you had a deed in lieu of foreclosure or a short sale, you will be able to qualify for a conventional loan in two years as long as you can put 20% down payment.  However, just waiting out the two year mandatory waiting period does not guarantee a conventional loan approval.  You need an automated underwriting system approval by Fannie Mae’s Desktop Underwriter.  What the automated underwriting system looks for is for credit and income after the deed in lieu of foreclosure and/or short sale.  If you have aggressively and conscientiously have been working on repairing and re-establishing your credit after your deed in lieu of foreclosure and/or short sale, you should have no problem in getting an automated approval by the Fannie Mae’s Automated Underwriting System.  The Automated Underwriting System, also known as the AUS, is like a brain where it takes into account your income, debt, assets, liabilities, and credit scores and comes up with a decision to either approve you or deny you.  In the event of a denial, the automated underwriting system will state the reason for denial.  Some reasons for denials are that the waiting period is not over, high debt to income ratio, poor credit, late payments after the deed in lieu of foreclosure or short sale, or current credit disputes.

No waiting period exception on short sales

If you had a short sale and your mortgage payments and all monthly debt payments were timely for 12 months prior to your short sale, there are no waiting period to qualify for a new mortgage.  In other words, if you kept on making your mortgage payments and your mortgage payments were current until the finalization of your short sale, you can qualify for a mortgage loan and do not have to abide by any waiting period regulations imposed by Fannie Mae or FHA.  However, your other monthly debt payments had to be made on time for the 12 months preceding the short sale.  Many potential homeowners who had short sales do not realize this loop hole.  If you have any further questions, contact Gustan Cho at 262-716-8151 or email at gcho@gustancho.com.  You can also subscribe to our daily real estate and mortgage newsletter at  www.gustancho.com .

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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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