Purchasing a Home After a Short Sale

Purchasing A Home After A Short Sale Purchasing a home after a short sale is possible, depending on how the sale happened

If you’ve gone through a short sale, you might think purchasing a home after a short sale is going to take a long time. Depending on what you are buying and how the financing is arranged, you might be able to get a new home as soon as you can find one and close on it.

The fastest way into a new home is to find one with owner financing. That way you don’t have to try to find a mortgage. You negotiate directly with the owner on payments, length of the mortgage, interest, taxes and insurance.

There are no real guidelines for owner financing because this is done outside the commercial financial industry. If you do choose this route, it’s best to hire a real estate lawyer to do a title search and check the mortgage paperwork. The attorney is your guarantee that you will own the home free and clear when you pay the mortgage off.

If you are looking for conventional financing for purchasing a home after a short sale, then you will have to wait. How long you wait depends on where you go for a mortgage and how much of a down payment you have. Conventional lenders often take their cue from the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac, the two quasi-federal agency which support traditional mortgages.

FHA RULES

If the FHA has insured the loan on your short sale, it takes three years before purchasing a home after a short sale is allowed under this agency’s rules, if you were behind or missing a mortgage payment. The clock starts ticking when the short sale shows up in FHA paperwork. If you did not miss a payment and stayed current for 12 months, there is no waiting period.

An exception to this rule is the “Back to Work – Extenuating Circumstances” program in place now. If you lost your home because you lost your job, or your take home pay took a hit, you may qualify for this. The program runs through Sept. 30, 2016. You still have to meet the regular FHA guidelines and whatever requirements the lender puts in place. Expect to fully explain in writing with official papers what happened with your job and income. You also need 12 months of good credit.

FANNIE MAE

This agency recently released new guidelines for purchasing a home after a short sale; five percent down with a four-year wait. If the home went to foreclosure before a short sale, this rule does not apply.

FREDDIE MAC

This agency has two different rules for purchasing a home after a short sale.

1) If you had to go a short sale because of financial problems you could not control, the wait period is 24 months. You have to build up a good credit file during those two years. The best example of extenuating economic woes is a medical emergency.

2) If your money woes are the result of bad decisions on your part, then the wait period is 48 months. Examples of this are: non medical bankruptcy and foreclosure.

Freddie Mac recommends beginning the mortgage shopping process two years after a short sale, regardless of why you went through a short sale.

VETERANS ADMINISTRATION

The VA does have a home loan program for honorably discharged veterans and spouses of veterans. The VA has a two-year wait for purchasing a home after a short sale if you missed a payment or were late. If you stayed current on the mortgage, there is no waiting period.
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