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Buying a Home After a Short Sale

Following the recent mortgage crisis, short sales have become much more common.  Recently, I’ve had several buyers curious as to when they can become homeowners again.  Below is an overview of the waiting periods involved.  The waiting period for a short sale begins on the closing date of the short sale which you can find on your settlement statement (HUD-1).Time business concept.

FHA (from HUD Handbook 4155)

Borrower Current at the Time of Short Sale:
A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all mortgage payments on the prior mortgage were made within the month due for the 12-month period preceding the short sale, and installment debt payments for the same time period were also made within the month due.

Borrower in Default at the Time of Short Sale:
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 3 years from the date of the pre-foreclosure sale.

Exception:
A lender may make an exception to this rule for a borrower in default on his/her mortgage at the time of the short sale if the:

  • Default was due to circumstances beyond the borrower’s control, such as death of primary wage earner or long-term uninsured illness, and
  • A review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control the caused the default.

CONVENTIONAL

Fannie Mae:
2-7 year waiting periods:
– 2 years – with a minimum down payment of 20%
– 4 years – with a minimum down payment of 10%
– 7 years – standard down payment requirements

Freddie Mac: 
4 year waiting period, but exceptions may be made for “extenuating circumstances.”

VA

Does not have specific short sale requirements, so it will depend on the lender.  Some may require a two year waiting period, and some may require no waiting period if the borrower was current on mortgage payments and other monthly debts 12 months preceding the short sale.

USDA

Three year waiting period.

These rules change from time to time, so please contact a personal mortgage advisor to see if you qualify.  If you are considering purchasing or refinancing in Richmond, VA please contact me for a mortgage consultation. To stay informed, follow me on Twitter and like me on Facebook.

If you are interested in purchasing or refinancing in one of the following states, I will be happy to connect you with a licensed loan officer in your state: Maryland, Delaware, Connecticut, Florida, Georgia, Maine, Massachusetts, New Hampshire, New Jersey, North Carolina, Pennsylvania, Rhode Island, South Carolina, Washington D.C., or West Virginia.

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