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

Related> Conventional Loan After Short Sale

Related> New Fannie Mae Guidelines On Mortgage After Short Sale And Deed In Lieu

Related> Waiting Period After Bankruptcy And Foreclosure

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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