Qualifying For Mortgage After Short Sale And Deed In Lieu Of Foreclosure
Short Sale and deed in lieu of foreclosure
A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale agreement on his/her principal residence to take advantage of declining market conditions and purchase a similar or superior property within a reasonable commuting distance at a reduced price as compared to current market value. This practice is often known as a bail.
A borrower is considered eligible for a new FHA-insured mortgage if from the date of loan application for the new mortgage, all:
1. Mortgage payments on the prior mortgage were made within the month due for the 12-month period preceding the short sale where no mandatory waiting period applies, and
2. Installment debt payments for the same time period were also made within the month due.
A borrower in default on his/her mortgage at the time of the short sale or pre-foreclosure sale is not eligible for a new FHA-insured mortgage for three years from the date of the short sale or pre-foreclosure sale. A borrower who sold his/her property under FHA’s pre-foreclosure sale program is not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale. Exceptions to the three year seasoning requirements may be made if the:
Default was due to circumstances beyond the borrower’s control, such as the death of a primary wage earner, long-term uninsured illness or a Back to Work – Extenuating Circumstance; and
The credit report indicates satisfactory credit prior to the event that caused the default.
Two Year Waiting Period On Conventional Loans With 20% Down Payment After Short Sale And Deed In Lieu Of Foreclosure
For those who have had a prior short sale or a deed in lieu of foreclosure, they can qualify for a conventional mortgage loan 2 years from the recorded date of the deed in lieu of foreclosure or after 2 years from the date of the short sale HUD Settlement statement only if they have a 20% down payment. There cannot be any late payment histories since the deed in lieu of foreclosure and./or short sale and they need to show re-established credit.
2015 Update On Conventional Loan After Short Sale And Deed In Lieu Of Foreclosure
Unfortunately, the two year waiting period to qualify for a conventional loan after short sale and deed in lieu of foreclosure with 20% down payment no longer is in effect with Fannie Mae and Freddie Mac as of August 2014. The new waiting period to qualify for a conventional loan after short sale and deed in lieu of foreclosure is 4 years from the short sale date and/or the recorded date of the deed in lieu of foreclosure with a minimum of 5% down payment and re-established credit with a minimum credit score of 5% down payment.
Gustan Cho NMLS ID # 873293