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Qualifying For VA Mortgage After Short Sale Process

Qualifying For VA Mortgage After Short Sale Process

This BLOG On Qualifying For VA Mortgage After Short Sale Process Was UPDATED On January 24th, 2018

The Department Of Veteran Affairs (VA) is the government agency that insures VA Home Loans for veteran borrowers.

  • VA has much more lenient Guidelines On Qualifying For VA Mortgage After Short Sale Process than any other loan program
  • VA realizes that veterans may have less than perfect credit than civilian home buyers due to serving in the armed services
  • We will discuss in qualifying for VA Mortgage After Short Sales on this blog versus other mortgage programs

What Is Short Sale & Qualifying For VA Mortgage After Short Sale

A short sale is when a mortgage lender gives permission to a homeowner to sell their home below what they owe on their mortgage loan.

  • Homeowners request short sale by their current lender because their mortgage balance is higher than their home values
  • The lender often gives permission for the homeowner to sell their home in lieu of foreclosure for less than the amount owned on their mortgage
  • Veteran Home Buyers who had a prior short sale on a home can qualify for VA Mortgage After Short Sale in two years after the short sale date
  • Waiting Period to qualify for VA Loans after foreclosure, deed in lieu of foreclosure, and Chapter 7 Bankruptcy is two years
  • FHA has a three year waiting period after short sale, foreclosure, deed in lieu of foreclosure
  • Fannie Mae and Freddie Mac require a four year waiting period after short sale and deed in lieu of foreclosure to qualify for conventional loans
  • Conventional Loans require a seven year waiting period to qualify after foreclosure

How Does The Short Sale Process Work

  • Short sales need mortgage lender approval and not all homes underwater qualify for short sales
  • The homeowner needs to prove financial hardship and prove to the bank that they can no longer able to afford the mortgage payments due to an economic event such as job loss or business loss or a substantial reduction of household income
  • A short sale is an alternative to foreclosure and can save the stress, time, money, and embarrassment of a regular foreclosure and sheriff’s sale

What Is Required For A Short Sale Request

Homeowner will need to obtain permission from your mortgage lender to get a short sale approved.

  • The first thing mortgage lender will most likely require is a detailed letter of explanation of why they are seeking a short sale
  • Along with the letter, borrower should attach all supporting documents such as the following:
    • Termination letter from employer if applicable
    • 2 years tax returns, 60 days or more of bank statements
    • 2 years W-2s, recent paycheck stubs
    • Financials, proof of reduction of income
    • Other supporting facts to prove financial hardship and why they can no longer afford mortgage payments
  • Homeowners who have a third party representative such as an attorney or short sale consultant, then they need to provide a letter of authorization which will authorize representative to represent homeowner
  • Homeowner should also provide an appraisal or a comparable market analysis to provide the mortgage lender the tentative market value of home
  • The mortgage lender will try to minimize their loses
  • But yet price it reasonable so they can get a fast sale
  • The mortgage lender will try to get as close to the market value as possible and will not be apt to be giving the property away
  • Once the mortgage lender approves the short sale, homeowner can now list property with the realtor of choice

Short Sale: What Next?

Once the property is listed with a realtor and get an offer, homeowners will need to provide the purchase real estate offer to mortgage lender for approval.

  • With the real estate purchase contract other things to provide is home buyer’s pre-approval letter and a copy of the earnest money check
  • Once the mortgage lender receives the purchase contract, the mortgage lender will review the contract and either accept the offer or come back with a counter
  • Most mortgage lenders are slow and this process can take longer than those of private sellers

 Short Sale Mortgage Lender Process

Short sales take normally longer than regular real estate transactions from private parties due to the red tape with getting the mortgage lender’s approval.

  • Once a home buyer signs a purchase contract, it can take over a week or more for the mortgage lender to get a counter offer or a signed purchase contract

How Devastating Is A Short Sale For The Homeowner?

A short sale will definitely plummet your credit scores but the good news is that the drop of credit scores is just temporary.

  • Veteran home buyers should start rebuilding credit from the date of the short sale and start adding positive credit
  • Get three secured credit cards with $500 credit limits
  • Use them frequently and pay them off every month, just leaving a $10.00 balance on them
  • A short sale will plummet credit scores as much as 200 points
  • But the good news is that credit scores will increase as short sale increases
  • Veteran home buyers can purchase another home and qualify for VA Mortgage After Short Sale after two years from the short sale date

Qualifying For VA Mortgage After Short Sale

Homeowners who are current on their mortgage payment until the date of short sale, there is no mandatory waiting period for to qualify for VA Home Loan after short sale date. Most mortgage lenders will require that homeowners skip a payment or two for the short sale to become effective. This late in housing payment right before a short sale will require a mandatory waiting period to qualify for mortgage after short sale on government and conventional loans.

  •  Borrowers will qualify for VA Home Loans after 2 years from the date of a short sale, foreclosure, and deed in lieu of foreclosure

Veteran Home Buyers who need a direct lender with no mortgage overlays on VA Loans can contact The Gustan Cho Team at Loan Cabin at 262-716-8151 or email us at gcho@loancabin.com. Over 75% of our borrowers are folks who could not qualify at other VA Lenders due to their VA Lender Overlays or gotten a last minute mortgage denial due to not being properly qualified. All of our pre-approvals at The Gustan Cho Team at USA Mortgage are full credit mortgage loan approvals fully underwritten and signed off by our mortgage underwriters.

Gustan Cho

www.gustancho.com

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