Qualifying For FHA Loan After Short Sale (1)

Qualifying For FHA Loan After Short Sale

Gustan Cho Associates are mortgage brokers licensed in 48 states

Home Buyers can qualify for FHA Loan After Short Sale. Qualifying for FHA Loan After Short Sale requires borrowers to wait out a mandatory waiting period after a short sale and foreclosure. HUD, the parent of FHA, requires no late payments after the short sale and/or foreclosure as well as re-established credit. The mandatory waiting period in qualifying for FHA Loan After Short Sale, deed in lieu of foreclosure, a short sale is three years. The three-year waiting period start clock starts from the date of the short sale that is reflected on the HUD-1 Settlement Statement closing papers.

Waiting Period Start Date On Foreclosure/Deed in Lieu of Foreclosure Versus Waiting Period After Short Sale

The three-year waiting period after foreclosure or deed in lieu of foreclosure starts from the recorded date of the housing event. The mortgage loan application when qualifying for FHA Loan cannot be dated prior to the three-year waiting period has elapsed. The borrower can have a real estate purchase contract that has been dated prior to the short sale date and/or foreclosure. But cannot receive mortgage documents and disclosures prior to the three-year anniversary short sale date. The FHA Appraisal can be ordered prior to the three-year short sale date and/or foreclosure.

No Waiting Period After Short Sale If Mortgage Payments Have Been Timely Up To Date Of Short Sale

There is no waiting period in Qualifying For FHA Loan After Short Sale if the homeowner has been timely on their mortgage payment until the date of their short sale. Unfortunately, many lenders will force the homeowner to be 30 days late on their mortgage payment in order to have the short sale in effect. Make sure if you are going through a short sale process currently that you do not skip any payments. Be timely on your mortgage payment until the date of your short sale. A 30-day late payment on your mortgage payment will mandate a 3 year waiting period in Qualifying For FHA Loan After Short Sale. Whereas if you are timely on your mortgage payments until the date of your short sale, there will be no waiting period in Qualifying For FHA Loan After Short Sale. Homebuyers can qualify for an FHA Loan one day after their short sale if they have been timely on their mortgage loan payments until the date of their short sale closing.

Other Requirements In Qualifying For FHA Loan After Short Sale

Besides the mandatory waiting period after a short sale, to qualify for FHA Loan After Short Sale, the borrower needs a minimum credit score of 580 FICO to qualify for a 3.5% down payment FHA Loan. Lenders do not want to see any late payments after a short sale, foreclosure, deed in lieu of foreclosure. Lenders want to see that borrowers have re-established credit after the housing events.

FHA Lenders For Bad Credit 

Home Buyers can qualify for FHA Loans with outstanding collection accounts and charge offs without having to pay them off. However, lenders do not want to see any new collection accounts that have been activated after the housing event has been finalized. If you are looking in Qualifying For FHA Loan After Short Sale, foreclosure, deed in lieu of foreclosure, please contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. We have no lender overlays on FHA Loans.  Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans.

FHA Loan After Short Sale Mortgage Lending Guidelines

A short sale is when a homeowner has a mortgage with a balance that is higher than the value of the home and gets the lender’s permission to sell the home for a price below what they owe on the home. The process of a short sale can be time-consuming.

What Information Does The Mortgage Servicer Need From The Home Seller To Get A Short Sale Approved

Before a home can be listed as a short sale home, the homeowner’s lender needs to review the homeowner’s following credit and income profiles:

  • financials
  • the amount the homeowners owes
  • the market value of the home
  • homeowner’s potential future job stability and income

What Is A Short-Sale?

A short sale is an alternative to foreclosure: By cooperating with the bank, the homeowner can get out of their home without their lender coming after them for the deficit or shortage of what they owe on their mortgage note. The price their homes have sold for is comparable to the subject property. Homeowners who are currently going through a short sale or have gone through a short sale can qualify for an FHA Loan After Short Sale if they meet the mandatory minimum FHA Guidelines. Need re-established credit and a minimum credit score of 580. 580 minimum credit scores are what is required to qualify for a 3.5% down payment home purchase loan.

Steps On Getting A Mortgage Approval For An FHA Loan After Short Sale

Qualifying For FHA Loan After Short Sale

Once the short sale of a home is finalized and reported on credit reports, credit scores will plummet by more than 100 points. However, this drop is a temporary drop. As long as consumers have credit tradelines and maintain perfect payment history, credit scores will increase as time goes by. Consumers who do not have credit tradelines should immediately get three to five secured credit cards. For maximum effect, consumers should have at least a $500 credit limit on each of the secured credit cards.

Keeping Low Credit Card Balance Will Maximize Credit Scores

As consumers maintain a low credit balance on those secured credit cards and pay them on time, credit scores should definitely improve. Lenders do not want to see any late payments after a short sale. Make sure to religiously make minimum monthly payments on time. One 30-day late payment will drop credit scores. That payment history will be reflected on the credit report for seven years.

Qualifying For FHA Loan After Short Sale: When Does The Three-Year Waiting Period Start After The Short-Sale?

To qualify for FHA Loan After Short Sale, there is a three-year mandatory waiting period after short sale with re-established credit. The three-year waiting period time clock starts from the date of the short sale that is reflected on the HUD Settlement Statement of the short sale. With waiting out the three-year waiting period and having re-established credit with timely payment history, borrowers should qualify for FHA Loan After Short Sale with no problem.

Getting Approved For A Mortgage After A Short-Sale

Borrowers with a prior short sale and want to get the process of qualifying for FHA Loan After Short Sale prior to the waiting period, please contact me at 800-900-8569 or email me at gcho@gustancho.com. We can pull a credit report and make sure that there are no errors in the credit report as well as to see ways of maximizing credit scores. We will help borrowers prepare and qualify for an FHA Loan way ahead of time so when they meet the waiting period they will be 100% ready to go.  Over 75% of Gustan Cho Associates borrowers are folks who could not qualify at other lenders due to their overlays.

Qualifying For FHA Loan After Short Sale: Re-Establishing Credit After The Short Sale

Homeowners with a prior short sale can qualify for an FHA loan after a short sale as long as they meet the mandatory waiting period after the short sale and re-established credit. Most lenders do not want to see borrowers without any late payments or derogatory credit after their short sale and foreclosure Lenders do expect re-established credit and at least three credit tradelines that have been seasoned for at least 12 months.

Meeting The Waiting Period Requirements After Short Sale

To qualify for an FHA Loan After Short Sale And Foreclosure, the borrower needs to wait three years from the date of the short sale or recorded date of foreclosure and/or deed in lieu of foreclosure Just because someone has waited out the 3-year mandatory waiting period after short sale and foreclosure does not automatically qualify borrowers for FHA Loan After Short Sale. We will cover more on qualifying for FHA Loan After Short Sale And Foreclosure in a later paragraph.

What Is The Difference Between A Short Sale Versus Foreclosure?

A short sale is when a homeowner has a home that is worth less than the amount of the balance of their mortgage loan. With short sales, borrowers will get the mortgage lender’s blessing to sell their home below what they owe and in lieu, the lender will not come after the homeowner for the deficiency. Just because a homeowner owns a home that is worth less than the amount of mortgage balance does not automatically guarantee that the lender will approve a short sale. There is a process involved with getting a short sale approved by the mortgage lender. The lender will want to see the homeowner’s financials.

How To Get A Short-Sale Approved By The Lender

Lenders also want to see that homeowners are financially distressed and cannot afford mortgage payments either due to loss of employment, new employment with less pay, or other extenuating circumstances such as divorce or medical issues. Homeowners who have plenty of assets, solid income, and good credit thinking of short sale just because the home is underwater, mortgage lenders will most likely not approve the short sale.

How Long Does The Short Sale Homebuying Process Take?

A short sale process takes time. Most short-sale homes take much longer to close. Everything from pricing and listing home, to purchase offers, to the mortgage approval process all need the lender approval on short sales. If the home buyer of the short sale home needs an extension to the closing date, the seller of the home has not said so and needs the lender’s approval. Lenders who own the home do not get back right away. Lenders normally take their time. Normal real estate purchase short sale transactions take 90 plus days to close. However, with short sales, closings can take 3 to 6 months if not longer due to the red tape of the mortgage lender.

Getting Pre-Approved For FHA Loan After Short Sale

As mentioned earlier, borrowers need to meet the mandatory three-year waiting period after a short sale to qualify for an FHA Loan After Short Sale And Foreclosure However, just waiting out the mandatory three-year waiting period after a short sale does not automatically qualify borrowers for an FHA loan. Lenders want to see re-established credit after a short sale and no late payments after a short sale and foreclosure. For example, homeowners who had a short sale three years ago and had several late payments in the past 12 months recently can present an issue with getting an approve/eligible per Automated Underwriting System (AUS).

Qualifying For A Mortgage After Prior Bad Credit

Lenders understand that consumers go through periods of bad credit due to extenuating circumstances such as unemployment, loss of business, divorce, or medical reasons. But people that go through tough financial times do recover and what lenders want to see from borrowers when they recover is that they have re-established credit and are making their monthly credit payments on time. One thirty-day late payment on a consumer’s credit report can plummet their credit scores at least 50 or more FICO points. That late payment history will stay on their credit report for a period of 7 years.

Is There Anything I Need To Worry About Qualifying For FHA Loan After Short Sale?

As long as borrowers have passed the mandatory three-year waiting period after short sale and foreclosure, have solid full-time employment with verifiable income, at least a 580 FICO credit score, no late payments after a short sale and/or foreclosure, and re-established credit after a short sale, homebuyers should not be concerned. Borrowers should definitely qualify for an FHA loan with a 3.5% down payment. Homebuyers with credit scores under 580 FICO and down to a 500 credit score can qualify for an FHA loan with a 10% down payment.  Homebuyers are looking for an FHA mortgage banker with no lender overlays, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, on weekends and holidays as well. You can also go APPLY ONLINE by clicking APPLY NOW. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *