PURCHASING AFTER A SHORT SALE, BANKRUPTCY AND FORECLOSURE BY Michael Chelst Branch Manager/Licensed Loan Officer FHA will allow a borrower to purchase another home immediately after a short sale if their mortgage was not delinquent in the last 12 months, they have no late payments on any other installment loan in the past 12 months, and if they are not purchasing a ‘like’ or larger home in a nearby neighborhood. In general, the underwriters are looking to determine that the cause of the short sale was not an attempt to improve the borrowers financial position, but done out of necessity. If the mortgage is past due at the time of the short sale, or they are late on any other installment loan in the last 12 months, the buyer must wait 3 years. However, exceptions can be made to the 3 year waiting period if the cause of the short sale is deemed to be related to circumstances beyond the buyer’s control. i.e. medical illness, loss of primary wage earner’s job, death etc. FANNIE MAE: 2 years with 20% down 4 years with 10% down 7 years with less than 10% down VA: No minimum waiting period after short sale. There are no specific short sale guidelines except that the lender must review the Veteran’s credit and make sure it meets VA’s credit requirements. Underwriting is subject to investor overlays. BANKRUPTCY FHA: 2 year waiting period. Exceptions can be made after one year if the bankruptcy was due to circumstances beyond borrower’s control. CONVENTIONAL: 4 years FORECLOSURE FHA: Borrower must wait 3 years from the date of foreclosure. An exception can be made if the property did not have an FHA loan and the foreclosure was due to circumstances beyond their control. CONVENTIONAL: 7 years IMPORTANT NOTE: A borrower who was on the deed but not the note of a short sale or foreclosed property, is viewed by FANNIE MAE and FHA the same as the borrower that was on the note and the same wait periods apply. Think Quit Claim before the property goes to short sale or foreclosure.
Posted on: Fri, 09 Aug 2013 20:05:02 +0000
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