Last week, Mark Wells of Preferred Financial Services discussed guidelines affecting mortgage financing after a foreclosure. Here, he covers a short sale event.
Short sales occur when borrowers are forced to sell a house for less than what they owe on it. In a short sale, the lender must agree to the sale, because they agree to take less than the pay-off balance of the loan, leaving them short of the money they are owed. In the past, a short sale was treated the same as a foreclosure, but since the recession affected property values across the country, short sales are no longer considered as serious as a foreclosure, and recovery of mortgage eligibility may be faster. Here are the current required waiting periods after having a short sale in your credit history:
For conventional loans: Four years from the deed transfer of the property that was involved in the foreclosure, then full eligibility is obtained with as little as 5 percent down payment. However, if the short sale did not result from financial mismanagement, then the waiting period is only two years. Generally speaking, if the mortgage was not more than 30 days late when the house went to the short sale, and there were no other late payments on the credit bureau at the time, the borrower is not considered to have mismanaged their finances and they are eligible after the two-year period.
For FHA loans: Three years from the date of the short sale, if the borrower was in default at the time of the short sale (120+ days late on the mortgage payment). If the borrower had no 30-day late payments on the mortgage on any other installment loan in the 12 months prior to the short sale, the borrower is eligible for standard FHA financing one year after the short sale.
For USDA loans: Three years from the short sale, no exceptions allowed.
For VA loans: Two years from the short sale if the veteran’s mortgage was in default. But if there were no late payments on the mortgage or any other installment loan 12 months prior to the short sale, then the veteran is eligible for VA financing one year after the short sale.
For jumbo loans: A minimum four-year waiting period, and the borrower’s credit scores must have recovered above a 720 threshold.
Next week, Mark will cover bankruptcy guidelines. In the meantime, he welcomes questions or comments, and is happy to review borrowers’ situations to help determine when their mortgage eligibility will return and how to best position themselves to qualify when it does. He can be reached at 864-235-9596 or via email at Mark@TheGreatestRates.com.
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