May 30, 2010
I’ve written on this subject before but I want to be more thorough this time. There
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have been too many articles put out lately that discourage people from contemplating a home purchase after doing a short sale. These articles express cynicism about home sellers’ financial habits and Realtors alike. Most Realtors doing short sales know how to cover the bases for their client to make sure they’re in a good position to buy a home down the road. Further, in my area (Saint Paul, MN), nearly 39% of homeowners are upside down on their home. Only a minority of these homeowners who would do a short sale on their home have destroyed credit. All too often unfortunately, they are told that they won’t be able to buy a new home for 2-7 years and, consequently, they let their credit go. This assumption of a waiting period is not true and serves as harmful information to the homeowner doing a short sale.
Prior to December 16th of 2009 there was no FHA rule prohibiting homeowners who had a recent short sale from purchasing a home. Few took advantage of this because the lending industry was wary and wanted clarification from HUD on whether this was ok or not. On December 16th of 2009, HUD gave that clarity with Mortgagee Letter 09-52 which allows a people to buy a home after a short sale if “they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and the proceeds from the short sale serve as payment in full.” One caveat to this; FHA will not allow the new loan if the borrower did a short sale “simply to take advantage of declining market conditions, and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.” When this rule came out, many thought that despite the fact that HUD allowed for a purchase subsequent to a short sale, no lenders would go along with it. They were wrong. Most lenders have adopted the rule as outlined in the mortgagee letter without additional underwriting guideline overlays.
But this did not deter the naysayers. They would assert that even if HUD and lender guidelines allow for it, the IRS would kill the deal. It’s true that a short sale can create a taxable event. Because I am not a CPA or a tax lawyer, I will refer you to IRS Publication 4681 which explains in detail what the tax consequences can be after a short sale. There are handy scenarios, examples and useful information of every kind. So a buyer who has a tax lien can’t buy a new home, right? Wrong.
According to the FHA mortgage credit analysis handbook 4155.1 REV-5, 2-5 (B), a homebuyer with a tax lien is eligible for a FHA loan when, “the delinquent account is brought current, paid, otherwise satisfied, or a satisfactory repayment plan is made between the borrower and the Federal agency owed and is verified in writing. Tax liens may remain unpaid provided the lien holder subordinates the tax lien to the FHA-insured mortgage. If any regular payments are to be made, they must be included in the qualifying ratios.” It goes onto read, “”Since the IRS routinely takes a second lien position without the necessity of independent documentation, eligibility for FHA mortgage insurance will not be jeopardized by outstanding IRS tax liens remaining on the property unless the lender has information that the IRS has demanded a first-lien position.” That’s right. The lien can be left unpaid and it will automatically subordinate to the new FHA loan without the need of additional paperwork.
But the naysayers are not yet done. They will say, “Oh but with a short sale and a tax lien, their credit will be obliterated. There’s just no way they’ll qualify.” All a borrower needs is a 620 middle credit score. Some lenders (I’m not one of them), will even go lower. I’m going to address this objection with an anecdote (and really, this is not an isolated incident – sadly, it happens more common than you think.) I recently had an applicant pull a 622 middle score. On this credit report was a judgment and 19 collections. That’s it. This person had defaulted on every extension of credit ever given and still pulled a 622. Not that an IRS tax lien and short sale aren’t damaging but, come on, they far from rule anything out.
My point in writing this is to serve as a reminder that in a lot of areas nearly two fifths or more of us are upside down, may want to move and are not deadbeats. Also, I wanted to get this out there to provide the facts to dispel the myth that homeowners who do a short sale are only welcome to take a timeout from homeownership. This is not their only choice. They’re welcome to continuing homeownership in the same way as the rest of us, . . . . Conditionally. 
Charles Dailey – iLoan – NMLS ID# 79048 – 612.234.7283
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We just sold our home through a short sale with payments timely. The neighborhood is not safe(drugs, prostitution, robbery). What lenders are approving FHA loans right after a short sale? We are in California.
Thanks for your help!
I am. I’m licensed in CA (NMLS ID 79048). Give me a call or shoot me an e-mail and I’ll see what I can do to get you pre-approved for your next purchase (651-234-7283 or charles@charlesdailey.com).
I’m in NY City, I’m 5 months behind on my first and second mortgages. i want to short sale my house. how soon can i buy a new house or a rent to own house?
You would have to wait 3 years from the date of the closing on your short sale to apply for and get approved for a FHA loan. If you have extenuating circumstances leading to your short sale and have a sizable down payment, you might be able after two years with a conventional loan. Getting into a house on a rent to own contract would be at the consent of the seller/landlord and there wouldn’t be a waiting period as their consent would not be contingent on a timeframe having lapsed since the short sale.
Can you define “not late” in payments? We’ve been a few weeks late, but never MONTHS! Credit, overall, isn’t great due to economy, but we’ve always made the mortgage. No other debt (car payments, etc). We are tring to relocate for a job with at least a 32% salary increase. It would be awesome for us but if we have to rent, there is novreason to relocate and give up a portion of that “American Dream”. Thanks for any insight! Oh….we’ve been in our current home since 2002.
Not late would be not having any late mortgage payments reporting to the credit bureau in the 12 months preceding the short sale. A payment would be late if it were 30 days or later from the due date. FHA also requires all other installment loans (i.e. car loans, student loans and such) to have 12 months of clean history as well.
Charles,
My real estate agent advised me to buy a new home first before doing a short sale on my existing home. Medical hardship (difficulty climbing upstairs due to a previous knee surgery) will be the main reason for the planned short sale. My questions are: (1) Am I assured that my Lender will approve a short sale with a new home purchase? (2) Is there a possibility that my Lender will place a lien on the new home? (3) What is the best course of action considering I can afford to buy a new home in cash. Purchase a new home first before doing a short sale or immediately after a short sale gets approved? (4) I recently withdrew huge amounts of funds from my Savings account in the last week of November 2011 so if the Lender will request for the last 2 months of bank statements by March 2012 (planned short sale), it won’t no longer appear. Am I in a valid position not to disclose or declare the withdrawn funds anymore to the lender?
To your questions (1) Are you assured your lender would approve it? I couldn’t say that for sure but I’ve seen it happen 2 times recently and the medical hardship really helps. (2) I don’t know what state you’re in. CA has a ban on 1st lien deficiency judgments but Minnesota doesn’t (for example). In a state like MN, the Realtor (or attorney) has to negotiate with your current lender to get a waiver on the deficiency judgment. This usually shows up in the short sale approval letter from the bank. (3) I’m really not sure on that one. (4) I don’t know what the disclosure requirements are for your particular lender but you definitely have to disclose all income and assets requested without exception. Not doing that, simply put, is fraud. On the other hand, you don’t need to disclose anything that they don’t ask for. Just stay truthfully within the confines of their request.
Charles, thank you for the prompt response and guidance.
Hello,
I am glad I came across your post. I have a question. I bought a house in 2005 and then met my husband, started a family, and we moved to a larger house. The first home lost about 1/3 of its value so we have been renting it out for the last 4 years. It has become a huge burden to keep decent tenants and we can’t make the payments on both homes. We really want to get rid of it. We have excellent credit and have never been late. We would like to move to another city to be near family in the next 2-3 years. I believe the original home is under an FHA loan. If we were to move, would we still have to wait 3 years since the new home would be larger/more expensive, even though it isn’t our current home that we are trying to short sale?
In that situation the 3 year rule would apply, yes. I’m sorry.
My wife and I are in the middle of a short sale. My wife is the only person on the mortgage loan. She had our house financed by two banks. One bank has approved the sale and we are waiting for the other bank to approve. We were also told that going 30 days late would expedite the short sale process, it has not. If our short sale goes through can my wife and I buy a house together, and how quickly would we be able too??? My credit score is excellent, my wife’s is middle of the road. I tried to qualify on my own, but cannot afford the size house we need for our growing family, with both our incomes we can afford the house we would need. Any advice?
It sounds like you did have a 30 day late and when that happens in the 12 months preceding the short sale, that will trigger a 3 year waiting period for FHA and Freddie Mac is sticking to their 48 month seasoning… or 24 months if their “extenuating circumstances” guidelines can be proven/met. Extenuating Circumstances are explained here: http://iloanhomemortgage.com/uncategorized/what-are-extenuating-circumstances/
Great thread. i am moving for work out of state and had to have a short sale. Wells fargo and Fannie both approved and waiting for closing now. I called wells and i do have a report of a single 30 day late. I have read articles claiming that fannie WILL approve another loan immediately following short sale IF there are no missed payments STARTING at 60,90,120+. so I am stressing because i would make a payment monday to avoid anything more than a 30 until closing. The buyer is trying to get things done on his end quickly too! i have a 780 credit score and know that i will have a ‘paid in less than what is owed’ on my credit but it sounds like fannie is now looking at approving people as long as they stay “current” —and i am just like others who were told i had to be delinquent to get the ball rolling. But i still have a chance in salvaging further waiting and damage if i can make a payment! –also wondering if investors will take back approval if they see that i had made a payment on property? my hardship is job transfer. thanks for the reply.
Even if you stay current, Fannie Mae will still put you through their waiting periods. Fannie Mae guidelines right now require a 72 month seasoning for FULL ELIGIBILITY. After 24 months… a borrower could qualify with at least 20% down and after 48 months the maximum LTV is 90%. Their “extenuating circumstances” rule may allow someone to only have to put 10% down in as little as 2 yrs. Fannie Mae’s extenuating circumstances are explained here: http://iloanhomemortgage.com/uncategorized/what-are-extenuating-circumstances/. With that 30 day late, the FHA wait would be 3 years. If that 30 day late weren’t there, there would may be no waiting period at all for FHA.
I’ve never heard of investors “taking back” an approval on the basis that someone continued to make payments. This isn’t to say that it couldn’t happen. Lenders and nutcases.
My husband and I spoke with Charles about buying a home after a short sale. We had about a million questions and Charles was very patient and understanding with us. He addressed all of our questions and concerns even though we live in a state that he is not licensed. Thanks again Charles.
We were approved for a short sale, have a signed purchase agrement. We were recently told we needed to be delinquent in order to fullfill the short sale. We are not delinquent, do not want to be. Our financial situation has changed, and we no longer need to sell short. What recourse does the buyer have? We were never late, so technically our short sale was never approved. We are no longer in the short sale process, but we did sign the purchase agreement. We were told by the bank through the process we did not have to be late, but it turned out we needed to be 31 days late. We tried to make it right in our brain to be late, but just could not do it. Can the buyers force the sale? Sue us?
I’m not sure on that one. That’s more of a contract law thing than a mortgage related matter. Sorry.
I am afraid I know your answer, but I have been scouring websites for insight to our dilemma. We owned a house in state A, relocated to state B (job required) and bought a house in early 2008. We rented out the house in state A to people to “rent to own.” market crash. they lost their business, divorced, etc. We were advised to default to get short sale and did so, selling the house in state A in August 2009 – almost a year later. Meanwhile, maintained all all payments on house in state B. Credit is decent high 600s. Now, new job requires us to move again. Income is enough to carry current house and modest home in new state – but probably not 20% down. Do we still fall under the time limits, and would any of this be extenuating circumstances?
Sorry – I am off a year – we were able to maintain the house in State A after no renters until July, 2009, then sold it in August 2010.
Unless you ran into a particularly hard headed underwriter, a reasonable person should conclude that this would fall under the extenuating circumstances category. That would mean that a 10% down conventional loan might be available to you 2 years after the closing of the short sale (8/2010) so I’m assuming 8/2012. FHA would have a 3 year wait. You might want to look into a rural development loan. I’ll email you contact info for a loan officer in your area if you’re interested in looking into a rural development loan.
Thanks Charles!! This blog is very helpful, and informative!
Hi,
We are in Florida and my husband (a police officer) has had cutbacks in his overtime pay which is hurting us financially, and we live about an hour and fifteen minutes commute time for my husband. He recently also had a shift change where he is driving this terrible commute at 5 am (needless to say he has had some near scares on the road). We made the decision that we needed to be closer to his job for safety and health reasons, and also financially so he could work more overtime to try and get us on our feet again. This has been going on for a while now, so bills have mounted up. We are still current on our mortgage, we have emptied our savings and borrowed money from our parents but have done it. My son has been a constant medical concern since birth,but recently he had a major event which has landed him in multiple hospitals, with multiple specialists, procedures, and follow ups, and multiple bills! The area we live in does not have many pediatric specialists so all of his docs are about an hour away (closer to my husbands job). Another reason we need to get back there asap. All of this is addressed in the hardship letter, with an additional letter about my son as this is a recent development in his health and is going to be something we will be dealing with for a while down the road. I have a Bank of America loan backed by Fannie Mae, any advice or ideas on if this stands a chance at going through while we are current, we value our credit like everyone else, and would like to accomplish this and be able to buy another home. Thanks!
Fannie Mae adopted Freddie Mac’s imminent danger of default rule. So they will also approve short sales where the payment is not late should they conclude that you are highly likely to go into default in the near term. Here’s an article on that you might like: http://iloanhomemortgage.com/uncategorized/do-i-need-to-be-late-my-mortgage-to-qualify-for-a-short-sale-dont-take-yes-for-an-answer/. Make sure that your hardship letter is clear and consistent. They may get confused with the inconsistency between “constant medical concern since birth” and “recent development in his health.” Good luck.
Hello! I’ve been doing searches regarding short sales and how soon we can buy and came across your site. Thanks for posting! This is our situation: we moved out of state for work and still have a home to sell. We’re renting in the new state until that home sells. We currently have the home listed for $33k less than we owe on it and planned on taking out a loan to cover the difference. We have had few looks and considered dropping the price again. However, this will increase the loan size we will need to take out. We have considered a short sale, but we are current and have an FHA mortgage. We would love to be able to buy here in the new state fairly quickly. We have excellent credit and have never been late on any payments for anything. Any advice for us?
Additionally, we are trying to weigh our decisions as to whether or not we should “short sell” or take on a loan of $50k+ to be able to sell at a much lower price.
The problem here is that your current loan is with FHA. I had mentioned this in another article but they require a loan to be 30 days late before they’ll approve a short sale (at this time). If there are any late payments at all, the waiting period for you would move to 2 years for conventional financing with 10 percent down or 3 years with FHA. In this case, the only way that you could sell and then buy would be to bring cash to close for the sale. The only other thing I could think of is if you can qualify for a conventional loan on your new purchase while still owning that other property and qualify with both payments (you couldn’t use rental income for qualifying purposes unless you had a 2 year or greater track record as a landlord).
Hello and thank you for this helpful information! I keep reading various information on buying after a short sale. I short sold my home due to a divorce back in Nov 2010. I have since moved 40 miles away from that area and rent in the town I would like to buy. I spoke to the LO at my local bank back in August about maybe applying for a mortgage this coming spring 2012. She said she had more concerns regarding the late mortgage payments (I had 90 days when the short sale closed at the lenders request to get the short sale approved) then that actual short sale itself. Have you ever heard of this? Any way she said I can try to apply in the spring after the late payments have aged a year or so and see what happens. My credit is good around 720. So do you think I have a chance? I would prefer to only put 5% down but could probably do 10% as well. The homes I am interested in are much more affordable then the home I sold short. About a $50k difference. Thanks!
I have heard of that. The late payments are critical. They are the difference between no waiting period and a two or 3 year waiting period. If your short sale was due to a divorce, you can probably document extenuating circumstances and purchase after 2 years have lapsed from the date of the short sale. In this scenario, 10% down would be needed. Otherwise, you’d have to wait the full 3 years for FHA eligibility to come back.
Do you think it would be possible to get approved prior to 2 years? I am hoping to buy this coming spring or summer, 2 years would be next Nov. 2012. Can a bank provide a conventional loan without backing Fannie Mae or Freddie Mac? Is there such a thing?
I don’t know of a product that would allow for a purchase prior to November 2012. I’m sorry.
We were approved for a short sale and have a buyer all set to close on November 30th. We were told we would be able to get a new FHA loan with 3.5% down to close the next day (if we find a house). We are not late on any payments, and now we are being told to miss the next payment. No way!! My husband got a new job, and now has a lengthy commute. We are way upside down on our house. We were hoping to move closer to his and my job. We are not looking for a huge, new house or anything, just something closer and comparable. Now we are told miss a payment from the short sale FHA people, AND the new loan people tell us miss a payment and no loan. Do we just forget the whole thing? We have a buyer, but I have kids. I do not want to bounce them all over renting for 3 years. Advice please…. Do I just forget it all? I am in Ohio.
You may find some good information in my most recent post, “Do I Need to be Late My Mortgage to Qualify for a Short Sale? – Don’t Take Yes for an Answer!” Read through it an then reply to this comment with any new information that might help me with your situation. I’m not licensed in Ohio but I can at least explain how this program works. Be sure to check who owns your loan. When checking, make sure you enter your address as the United States Postal Service knows it. To find out what the USPS thinks your address is, go to http://www.usps.gov, click on find a zip code on the left and enter your address. Whatever comes out is the one you want to use.
Bank of America is our lender, it is an FHA loan. An attorney has told us we must be late in order for the short sale to go through. We are working with a mortgage company trying to use WF to underwrite the new loan. Does this help any?
That does help. The 3rd one down in that post I previously mentioned has a link to FHA’s current policy on this one. It does mention that they don’t approve short sales unless the mortgage holder is at least 30 days late which is a stupid and unenlightened policy. They are one of the few remaining entities that hold this position. What’s more damning is that you’d have to either wait 2 years and put 10% down on a conventional mortgage after documenting your extenuating circumstances or wait 3 years for full eligibility for FHA again if you should have even 1 30 day late payment. It’s a damned if you do, damned if you don’t proposition. I had a similar situation happen to me and I decided to rent. The silver lining is that there are 4 years of “shadow inventory” on the market (http://realtormag.realtor.org/daily-news/2011/10/04/shadow-inventory-continues-weigh-market). This will likely mean that homes should stay affordable for at least that amount of time so hopefully, after your waiting period is up, you’ll still be able to get a good deal.
Thank you
You bet and I’m so sorry. It’s really a shame that you’re only finding out about this now. It must be hell. One more bit of unsolicited advice. Make darn sure that if you proceed with your short sale, you’ll be guaranteed in writing that there will be no chance of a deficiency judgment.
We are not proceeding. We were up front from the beginning in June of not wanting to miss any payments. We discussed this with our bank and the realtor. Before we did anything, we made sure we were approved for a new loan. We tried to gather all the information. It is so hard when the professionals are telling you incorrect information. I really do appreciate your prompt responses and your unsolicited advice. Enjoy your evening.
Charles,
Heard about you on a website and thought I would see your input on my situation.
I did a short sale in August 2009 and like some other people said we were late on our payments because we were told to in order to do a short sale we had to be. Also because my then boyfriend was laid off so we could not pay. It was settled (says so on my credit report) and we don’t owe anything to the bank. I ended up being able to get a car loan in October 2009 which raised my credit score. I’ve been renting since the short sale and don’t have any late fees for my credit cards and they are in good standing. And I had a very good credit score before purchasing a home, I don’t know what my current score is but I would think it is good. I keep hearing 3 years for a FHA loan so is that true in my situation or are there other options or ways to go around how my short sale ended? Are there circumstances that waive the time limit?
-Amy
a hopeful soon to be homeowner in minnesota
Amy,
The only way around the 3 year waiting period is if you can claim and document that your short sale was due to extenuating circumstances. In this case, the waiting period would be two years but the loan type would have to be Fannie Mae backed (or conventional). Also, they would require 10% down in this case. Here’s a full list of waiting periods. Here are the guidelines on documenting extenuating circumstances. I hope this helps!
Regards,
Charles Dailey
I did a short sale in Jun 2008, I was late on my payments a couple of months, doing so at the direction of the mortgage company and the Realtor handling the sales. I have no tax liens on the property, other than a promissory note of $50 a month. I have one credit card write off (the credit company would not except my monthly payments; was told to stop the harassing call, which they still do); at any rate I own so property, I like to use as a down payment on a new home, which would count for a little more than 20% down. My mid score is 640, probably a little more now because over a month ago it was 630, seems to be going up about 10 points a month. Haven’t been late on anything for almost 3 years other than what’s mentioned. I looking for a VA (have my certification in hand) construction to permanent mortgage loan. Any suggestion and/or mortgage company/bank recommendations? Thank you in advance for your reply.
I would recommend Dan Bengston at dbengston@LendSmartMortgage.com or (612) 616-3646 to get you taken care of in that scenario.
we did short sale in california in oct 2010 with advise by citi bank to aprove short sate we stoped last 3 months payment,when can we buy our second home.my husbend credit score is 710 now
This happens so often it makes me sick. Some party to a short sale transaction will suggest that someone who’s current on their mortgage go into default on their mortgage for the sake of short sale approval when it’s not necessary. Unfortunately no, if there are late payments on the mortgage or installment debt in the 12 months preceding a short sale, the FHA will impose a 3 year waiting period before insuring a loan.
Hi Charles,
I’m in the middle of a Chapter 13 bankruptcy, and my wife and I are now short selling our current home (we have an offer and it’s in US Banks hands). Going into the bankruptcy my credit was very good (in the 700′s) but due to unemployment and medical bills for various proceedures for my wife, we missed several house payments. I’m assuming that a Contract for Deed is our only chance at getting into a house for the next few years? With the large down payment in a C4D, is the housing market “stable” enough for that to be a wise move vs. renting?
You could do a contract for deed or a lease with an option to purchase. Here’s how those work: http://iloanhomemortgage.com/borrowers/choosing-your-iloan-mortgage-program/lease-with-option-to-purchase/. Because of the late payments on the mortgage and the bankruptcy, you’ll be subject to a 3 year waiting period before being eligible for FHA financing. While the market may seem somewhat stabilized now and the Minneapolis/Saint Paul market has outperformed most markets nationally, 3 years is too far in the future to be able to predict the presence or absence of price stability. Others may be bold enough to render that kind of an opinion but I think it’s too hard to tell. I do know that rental properties are getting scarce. Since the crash, locally, rental rates have gone up 16.1 percent and are projected to go up another 10 percent over the next 12 months so that’s kinda creepy. I hope this helps!
I forgot to mention, I have never been late on a payment and don’t intend to be. My realitor said if I stayed current on my payments the short sale would only effect my credit by 30 or so points. ???
To suggest that the credit impact would be 30 points or so is reckless and disingenuous. Different lenders report short sales to the credit bureau in different ways. I’ve seen them report as charge offs, paid collections and mortgages with the comment, “creditor settled for less than the amount due.” The last of these is the most common and the most damaging. While nobody but Fair Isaac can claim to know the algorithms for credit scoring, I’ve seen score drops ranging from 43 points to 89 points and it seems to depend largely on the depth of the borrower’s credit report (if it were truly treated like a foreclosure, Fair Issac claims it can be as many as 150 points). Needless to say, for someone to have a qualifying FHA credit score for a mortgage after a credit hit like this, it is a compliment to the borrower’s payment performance and credit management. The fact that this credit score is maintained through a financial hardship that was recognized and affirmed by their previous mortgage lender only further fortifies this compliment.
Source: http://iloanhomemortgage.com (http://s.tt/1384J)
Love this article! I just met with a realitor last night who told me about this idea. I live on the east side of St paul, bought by house in ’05 at the peak of the realestate boom with my then husband. My divorce was final last Sept. and I have now met someone but he has two kids and I NEED a bigger house. Unfortunatly I will have to come up with $42,000 to be able to break even and sell. (Hence short sale) I am trying to get some information as to how this will effect my credit (last time I checked it was 790) and if I will be able to buy a bigger (probably more expensive) house right away? My realitor said he can make it happen, but you can’t believe everything you hear.
A Realtor couldn’t make that happen since it’s a matter of financing and the only way to do anything of the sort would be with a FHA loan and Realtors can’t write FHA loans. Remember if a borrower purchases a home after short selling another home it is possible to get FHA insurance if they can reasonably demonstrate that the property being purchased is inferior to the property previously sold short or the property is wholly dissimilar (i.e. moving from a single family residence to a condo) or (not and) the property is outside of a reasonable commuting distance. If you believe anything other than this, you’ll be getting led astray.
Hi Charles – first off I have to say what a great post this is!
My situation is that I pursued a short sale in CA on a property that in 4 years dropped from $565 to $321 in value – same bank (Suntrust) with both loans (100% mortgage) worked with me to a ‘full reconveyance’ granted only after I missed a payment did the file move from the big pile that gets bigger to the pile that actually gets worked:)
Got decent income with the same employer for 5 years+ and my score is around 670 already (short closed in september).
In reading your post I am thinking that it pretty much is a 3 year wait for me since I had lates an there were no extenuating circumstances? Do I have any options to get in sooner?
Thanks in advance for any advice Charles
First of all, welcome to the club. My house went from 530 to 240 (ouch)! And when you talk about having to miss a payment in order to get anything done, I know what you mean. Unfortunately, that does impose a 3 year wait for FHA. If you wanted to buy something prior to that, you have to do a lease with an option to buy (http://iloanhomemortgage.com/borrowers/choosing-your-iloan-mortgage-program/lease-with-option-to-purchase/) or a contract for deed (http://en.wikipedia.org/wiki/Contract_for_deed).
Suntrust huh? We are a military family. Husband forced to move out of state. Told by our realtor we had to do a short sale. Suntrust told us we had to be in default for 2 months before being considered for a short sale. We said prove it in writing! They couldn’t produce it. We told them they can’t legally enforce something if its not in writing. We never defaulted. I called my state rep, congressman, senator and left messages as to how it was wrong to force people to go into default and have nothing backing it up, let alone military families being PCS’d. We received a phone call stating we didn’t have to be in default and our credit report would not be affected…Its affected all right. My short sale will be reported as “Account paid in full for less than full balance”. Gets better. We found out it reads that way 1 week before closing on our home. Loan denied!!!! (we should have closed Sep 28th 2011). So, No defaults, lates nothing else negative on the credit report. If I understand correctly, we can apply for a FHA loan with 20% down? My heart goes out to all of you going through this. What happened to America….That was just a dream!!!
It’s normal for credit reports to report “creditor settled for less than the amount due” after a short sale and it does affect a credit score. I’ve seen it end up being as low as 43 points and as high as 89 points. HOWEVER, just because it reports creditor settled for less than the amount due BY NO MEANS suggests that your loan shouldn’t be approved. If you have no late payments on your prior mortgage, installment debt and are either relocating or not buying a home that is similar or superior to the previous home (if you’re not relocating) then your loan SHOULD BE APPROVED. Your lender may not know this though. It would seem that many are pretty slow to catch on to how this is supposed to work. If you’re in MN or CA, drop an online application in and follow up with a call or e-mail and let’s fix this mess: http://iloanhomemortgage.com/about-iloan/charles-d-dailey/charles-dailey-welcome-letter/
I have a question regarding the 3 year wait. The loan we defaulted on was a conventional loan not a FHA loan. I have been doing research and pre-foreclosure applies to a FHA loan,so does the 3 year waiting time apply? My husbands middle score is 686. We short saled our home in April of 2009
You would have a 3 year wait to buy with a FHA loan if there were any late payments on installment debt or the mortgage in the 12 months preceding the short sale. Here is a good article on waiting periods: http://iloanhomemortgage.com/uncategorized/waiting-periods/. Provided that there were extenuating circumstances surrounding the short sale, you might be able to buy after two years even if there were late payments using 10% down and conventional financing. Here’s more information on extenuating circumstances: http://iloanhomemortgage.com/uncategorized/what-are-extenuating-circumstances/. I hope this is what you were looking for!
So we own a condo that we bought for 88,000 and the current prices of condos are here are going for 60,000. We would like to move in a house because we would like to start a family. We talked to a relator and she said we could short sale and be able to buy another home right away. So my question is, is that possible? We would be using a VA loan which is no money down. We are current on all payments and have never made a late payment. Also we got the money from the goverment 7500 loan that we have to pay back every tax season. Would we have to pay them back right away since we are taking a loss on the profit and not walking away with anything?
OK, this is a complicated one for stupid reasons. I’m going to email you and get more details because I want to make sure that I’m giving you the right advice.
Question. I recently did a short sale due to medical issues which cut my hours at work for the last 2 years. In doing the short sale I presented documentation to FHA n Bank of AMerica stating I was doing this because of my health. They approved the short sale. I now know that I didnt have to be behind to qualify for a short sale but wasnt told this by my lender and told i had to be to qualify so I was behind 2 months and sold right away.. Question is that in this curcumstance because of illness is it documentated in the bank n fha so that when I request another loan they will hopefully approve and how long is the wait under this cirucmstance..
Jackie
Your medical reasons for doing the short sale would constitute an extenuating circumstance. Therefore, you’d be eligible for conventional financing with 10% down after 2 years and have full eligibility after 4. FHA would have a 3 year wait. You might be able to get an exception after 2 if you can prove in writing that the bank instructed you to be in default.
I owned two homes in California and lost one to forclosure in February, 2008 and had to sell the other as a short sale in July, 2009. My wife lost her job and we were unable to make the payments at the time. She was out of work for about 10 months, so by the time we were able to start making payments again, the house was placed in pre-forclosure. We tried to work with the bank, but they refused to budge on any kind of assistance. We were forced to short sale the house and now here I sit. Since then, I have dramatically increased my income at my job, as has my wife. Combined we make over $200K per year and have 670 (she) and 650 (me) credit scores. By myself, I made $110K last year and have enough money saved to do a conventional loan if need be. I found a house that I could purchase for $106K, but nobody will give me a loan, even though I made more last year than the house was even selling for. Because of the short sale with late payments, I am stuck in a weird predicament. Not only do not qualify for an FHA loan because of the 3 year requirement, I also do not qualify for a conventional loan because most banks have a 5 year limit, or longer limit. Any suggestions?
Well, I did some additional research and I still can’t find a way around this. I don’t see how under the circumstances, you’ll be able to pull it off earlier than July of 2012. Sorry about that. I was going to suggest you apply for FHA and ask for an exception but I don’t see how that will work given the prior foreclosure. An underwriter would turn the application down based on non-compliance of program guidelines and turn the exception down due to a prior “pattern of default.” Stupid. It sure looks like a safe loan. Too bad. I’m sorry.
Hi Charles! Great post!
we have a VA loan and we are being transferred out of state. we have no mortgage lates and no other lates. Our credit is in the 700s as of now. we are upside down and are doing a short sale. Can we be eligible for another VA loan immediately? if i am understanding your posts correctly- it looks like we could be eligible for FHA? what do you think? thanks for the great post
Thank you for your kind words. The waiting periods for buying a home after a short sale with a VA loan can be found here: http://iloanhomemortgage.com/uncategorized/waiting-periods/. As strange as FHA guidelines are regarding this type of transaction, VA’s are even more vague. This can either be good or bad depending on how smart your loan officer is and how risk averse the lender he/she works for is. I hope this helps!
This has been a very helpful thread. We had a short sale on our home and closed April 2011. We were not behind or in default and we were not pursued for the difference we owed the bank. We had one missed (and made up) payment in the five years we lived there and that was a few years before the short sale. Does this still count against us and put us into the category of having to wait the three years for an FHA loan?
Great question Michelle! If you have it in writing from your prior mortgage company that the proceeds from your short sale served as satisfaction in full (got the mortgage satisfaction and they agreed not to go after a deficiency judgment) that’s the first step. You can’t have been late on your mortgage or installment debt for the 12 months preceding the short sale. So if you had a late payment 13 months before the short sale but none in the subsequent 12, you’re OK and wouldn’t have the 3 year waiting period.
My brother wants to buy a house, he was on title on a shortsale property sold in 2010… but not on the loan. He included the house in his 2009 taxes and filed the shortsale in his 2010 taxes. I was told he cannot buy if he included the shortsale in his taxes for 2 years, is this true?
There are several ways in which that advice is off the mark. First of all, the waiting period after a short sale where there were late payments on the mortgage and/or installment debt is 3 years not 2. The only way it can be 2 years is with a 20% down payment and documented extenuating circumstances. But in his case, it doesn’t sound like that would apply. I’m assuming that he was on title but not on the promissory note or mortgage. If that is the case, he is OK. If he was on the mortgage and/or promissory note, then this could be an issue. If that were the case, then he could only buy a home right away with FHA financing if there were no late payments on the mortgage and other installment debt.
This will make more sense if we consider it abstractly. What are we really evaluating as lenders here? The answer is this: underwriting creditworthiness after a major credit event (i.e. short sale). If the mortgage wasn’t his to pay (for instance if he wasn’t on the note), it was not his credit event but rather that of someone else. He may have been wrapped up in it as a taxable event but that has only to do with income and liability, not credit. It appears in the advice that you are getting that these two distinctly different issues are being conflated.
I’m licensed in CA and would be happy to sort this out for you and your brother. You can get started by clicking here. . . .
We short sold our house in 2010 and were late for 6 months of payments. Now my grandmother wants to purchase a home with me (wife) as her co-signer. She is retired and her income would not be suffiencient. She wants to rent this house out to us and we pay her for rent, as we have to rent anyways. Can you please advise what would be the best solution for our situation?
If there were lates on the mortgage or installment debt in the 12 months preceding the short sale, the waiting period for FHA financing will be 3 years from the date of the closing on your short sale. Adding a co-signer won’t change this waiting period. Sorry.
Is there any other type of financing available, besides FHA?
Not without being subject to waiting periods. Here’s a great post by one of the team here at iLoan on waiting periods after foreclosure, bankruptcy, deed in lieu and short sales for all loan types: http://iloanhomemortgage.com/uncategorized/waiting-periods/
We short saled our house back in August 2008 (California). We have been renting a house for almost three years and the owner has now been foreclosed on. We would like to try and purchase a house again. My credit is now 668. My questions are as follows;
1. Can we start the paperwork with FHA and have it close the day after the deed transferred to the new owners?
2. Can we place a 5% downpayment with an FHA or does it have to be 10% because of the short-sale 3 years ago?
Thank you for your help. We havent been able to get a straight answer from anyone.
Can’t get a straight answer from anyone, . . LOL. No kidding. Your first question is a clever one. If you are waiting for the formal 3 years to pass for FHA eligibility, then the FHA case number must be pulled after the full 3 years has passed (a FHA case number is a unique 10-digit number assigned to a loan through Case Number Assignment on the FHA Connection. A loan assigned a number is called a case). This number is pulled after the loan application is taken. So, you’d have to apply 1 day after the 3 day waiting period. If, prior to your short sale, you weren’t late on your mortgage or installment debt, then there is no waiting period per Mortgagee Letter 09-52 (referenced in this post). With FHA the down payment is 3.5%. I think that you’re confusing the 10% down thing with non-FHA guidelines (Fannie Mae). Fannie Mae will let you buy a house 2 years after a short sale if you can document extenuating circumstances (more on that here: http://iloanhomemortgage.com/tag/extenuating-circumstances/). I’m not sure if these were the answers that you were hoping for but they are correct. In that sense, I suppose they are what you’re looking for. I’m licensed in CA and would love to help you with your upcoming purchase (either way, it’s going to be soon
).
I short sold my house back in October 2010, but I hadn’t been my mortgage since October 2009 which was the same time I put my home on the market. Before that, I had tried the Obama plan, made all my trial payments but then was denied permanent modification. My mortgage company served me in January 2010, 90 days after I stopped paying, but as everyone knows the FL courts are jammed with these cases. I was in the process of doing a deed in lieu but I ended up getting an offer on the house and the bank accepted the short sale.
So my questions are these:
1. Does this count as a short sale or a foreclosure since I was basically in the process of getting foreclosed on even though technically I hadn’t?
2. How long will I have to wait to purchase another house?
thank you for your help,
If it reports to your credit as “foreclosure proceedings started” it will be underwritten as though there was a foreclosure and the waiting period would be 3 years for FHA. That’s not that big of a deal in this case since if there are late payments on the mortgage prior to a short sale the waiting period is 3 years anyway.
Okey here is my situation, I short saled my house July 2009, we are current with our mortgage since we had that house, then something came up (my husband has to start paying for alimony) that we won’t be able to afford this house anymore. So our agent told us to not pay the morgage in order to qualify for short sale, so we did that then the agent was able to sold the house. But we notice that if we run our credit, because we have 2 loan, one says that fully paid and the other ones says “failed to pay”. So I don’t really know where we stand at this point, it’s been 2 years already and we really wanted to buy our home, my husband is done with the alimony. Our credit score right now is at the 690′s no late payments on credit cards, and we both have a stable job.
Circumstantially, you can buy a home after two years with 10% down using Fannie Mae backed financing if you have extenuating circumstances (http://iloanhomemortgage.com/uncategorized/what-are-extenuating-circumstances/). You’d have to have your loan application run using the Fannie Mae automated underwriting system and get a “approve/eligible” result (which can be tough but is possible). Otherwise, the following waiting periods would apply: http://iloanhomemortgage.com/uncategorized/waiting-periods/. We’re licensed in MN, WI and CA. Let us know if we can help.
Hello.. I am currently doing a short sale on my Townhome in Tampa FL. I owe 149,000 and they are selling for 65.. My question is that I have a attorney working with me and I thought I had a conventional loan since it has changed lenders so many times but I have a FHA loan. I was told tha I had to be 30 days behind to qulity for a short sale so I am entering my second month of non payment. I already have a buyer and am waiting for the approval process from the bank for it to go through. I am not behind on any of my bills and wasnt behind on my mortgage until I started this process. I have a pulmonary problem and have trouble walking up and down the stairs so wanted to get out of my home before I would have to due to my health and my income has changed due to my having to work a few hours less a week if I dont feel well. I would like to buy a smaller home next year and have been just looking what is out there and can definately find something for about 100,000. My question is since I have a FHA loan will I have a problem finding financing. ?? Will I ever qualify for a FHA loan again?
Jackie
I am currently in the process of selling my house short sale in Maryland. My credit score is 697 and I have never been late on any type of payments what so ever. How soon affter will I be able to buy another house. I hear that I can purchase immediately but what exactly is immediately? I will be getting an FHA loan and putting 3% down. And what exactly does npt purchasing a ” similar or superior property” mean? and what is considered “within a reasonable commuting distance.”?
Immediately means immediately. The same day if you’d like (provided that the loan you’re currently doing the short sale on isn’t a FHA loan). Unless you’re relocating for work or something like that, the “within a reasonable commuting distance” provision would apply. This is because the rule is so vague that the loans are underwritten very conservatively. What does a “similar or superior property” mean? This is also vague but it essentially means that in order for the FHA loan to work, you’d have to take a step down in housing. The price of your new purchase vs. the price of the last one is not considered. Rather, they are looking for a more modest home in terms of square footage, age of construction, number of bedrooms, number of bathrooms, etc. . . Your loan officer and Realtor will have to closely coordinate on this to ensure that the houses you’re looking at will be OK for your loan officers underwriter. I’m not licensed in MD so I can’t help you there. Sorry about that. If taking a step down doesn’t work, you may have to look into renting, a lease option to buy or a contract for deed. You’d have to sit tight there for at least 2 years and then use a conventional loan to purchase proving “extenuating circumstances.” Or wait the full 3 years for full FHA eligibility.
Thank you so much for your information.
The loan I am currently doing the short sale is Conventional. Im still a little confused on the similarity or superior concept. When u say step down, do u mean down size? i currently have a 3 bdrm under 1100 squarefeet. Or do mean more up to date house? i apologize. im just confused.
How does short sales affect credit? My loan office told me I should wait about 2 months after before i get my new loan but i dont cleary understand why i should if i can purchase immediately…..
I do mean downsize. And that’s the hard part. My guess is that downsizing from a 3 bdrm and 1100 square feet is just too hard. You’ll want to carefully consider waiting 2 years, documenting extenuating circumstances and buying with a conventional loan where you won’t have those restrictions. I hate to see people chase home ownership at the expense of the quality of their life. As to your credit question, it takes around 45 days give or take for the short sale to hit your credit report. Different creditors report it differently to the credit bureaus but usually it says something like, “creditor settled for less than the amount due.” The score drop will be different for different people. For instance, let’s say that you have several accounts on your report. In this case, the mortgages would represent a smaller component of your overall credit profile and you wouldn’t be hit as badly as someone who had just a mortgage and a credit card. I’ve seen score drops of as little as 31 and as large as 96 so far. I hope this helps.
What if the property that I purchase is priced at a high price than what my house short saled for? does the downsizing or superior rule concept still apply in this case?
It does still apply.
I had a job relocation in August of 2008. I had put my house on the market and never had any offers. Or realtor recommended doing a short sale. We remained current on both the primary loan and home equity loan throughout the entire process. Our home equity loan was transferred to a personal loan to be paid in month;y installments. We have been renting a house since September of 2008 in the hopes of purchasing a new home within two years. Our credit scores dropped to 677 however we have never been late on anything. We were just approved for a FHA loan, but they said we do not quality for the PMI so we have to put 20% down. How long till we can purchase a house with the 3.5-5% down, we have heard many different responses. Second, it appears that the home equity loan was reported to the credit bureaus as settled not paid in full? Is this an error since we have been current on monthly payments as per the short sale agreement? Please help us clarify our confusion!!
You sound to be eligible right now. I’d have to look to be sure but I think you’re good to go. I’ll shoot you an email.
We live in GA, and I am considering taking a new job in FL, but we still owe $340,000 on the house we are in right now. The houses in the area are selling around $280,000 and below due to the market. My question is how do I sell the house and still buy a new one without taking too much of a hit. My credit score is above 750 and never been late on a payment and have very little debt, except for the house. Do I buy new house and pay for two mortgages and then short sell the house in GA? The job is a great opportunity, but don’t want to put my family deep in debt to take it.
You could buy a house in FL before selling your house in GA but you’d likely have to qualify with both mortgage payments. You wouldn’t get credit for rental income on the property in GA unless you had a documentable history of owning rental property.
If you did a short sale, your credit would take a big hit. For some it’s more than others. For instance, if one had a lot of credit tradelines reporting to their credit bureau (i.e. several credit cards, a couple student loans and a car loan) the hit wouldn’t be as bad as if one had just a mortgage on the report. This is because in the latter case, the mortgage represents a larger portion of the overall credit history and is therefore weighted more heavily. To qualify for a FHA loan after a short sale, you’ll want a 640 credit score. Some will take lower credit scores than 640 but a 640 score will keep the most options open and you’ll need them.
If you do a short sale and are relocating, buying with a FHA loan will be easier than it usually would be. This is because you’ll have an easy time proving that you’re not buying a similar or superior home within a reasonable commuting distance; one of the requirements of FHA. Beyond that, you’ll want to have no lates on your mortgage or other installment debt and make sure that your lender waives their right to a deficiency judgment as part of their agreeing to the short sale. After that, so long as your credit score is qualifying, you should be ok for a FHA loan. There would be a two year wait for a conventional loan so you’d have to use FHA.
There are more obstacles to keep an eye on. First, you won’t be able to close on your new transaction if you use a FHA loan until you have 30 days’ worth of paystubs from your new employer. Here are some related posts and links that may be of interest to you:
1. Short Sales Do Not Require a Delinquent Mortgage – http://activerain.com/blogsview/1421780/short-sales-do-not-require-a-delinquent-mortgage-imminent-danger-of-default-
2. Upside Down on Your Home? – http://activerain.com/blogsview/1582032/upside-down-on-your-home-here-s-your-playbook
3. FHA Mortgagee letter 09-52 – http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf
4. Waiting Periods After Major Credit Events – http://iloanminnesota.com/2010/11/02/waiting-periods/
5. What are Extenuating Circumstances? – http://iloanminnesota.com/2011/03/23/what-are-extenuating-circumstances/
I hope this helps and good luck Howard.
I bought my condo in March of 2007 and it is now worth 70% less. I am able to afford the mortgage but throwing money into something that is not going to be worth what I bought it for at least 10 years does not make sense. I am going to try and short sell it and keep the payments current and hopefully the bank will approve the short sale. How long after the sale can I buy something new?
If your current loan is not a FHA loan, you stay current on your mortgage and installment debts and you don’t buy a similar or superior home within a reasonable commuting distance to the condo that you’re selling short, . . then there is no waiting period to purchase another property with a FHA loan. If there are extenuating circumstances to your short sale (http://iloanhomemortgage.com/uncategorized/what-are-extenuating-circumstances/), then you can buy with a conventional loan using 10% down after 2 years.
Hello,
Where should I start. .. We were told by our lender that in order to do a shortsale you have to be late. the lender Wells Fargo, we even have the email from Wells Fargo stating that we need to fall behind on our payments in order to start the shortsale process. (How is this even legal) (a True catch 22) We have never missed a payment, and had to shortsale in-order to move due to a job relocation. We had great credit high 700′s and now our credit is 660′s. Wondering if there is anything we can do to get a house. We are currently renting in the St. Cloud area and would love to buy a house. It has almost been 1 year and really want to own our own home! Thanks for your feedback. Lora
Don’t miss a payment on your home! Wells Fargo doesn’t write the rules, they just service the loan. If Fannie Mae or Freddie Mac own the loan, you don’t need to be late on your mortgage to get approved for a short sale. If they own it you need to prove that default is imminent (http://activerain.com/blogsview/1421780/short-sales-do-not-require-a-delinquent-mortgage-imminent-danger-of-default-). To find out if your loan is owned by Fannie Mae or Freddie Mac click here http://www.fanniemae.com/loanlookup/ or here https://ww3.freddiemac.com/corporate/.
Lora, it really seems like you’d be a great candidate for buying after a short sale with a FHA loan.
This article and thread is very interesting. I was the co-buyer and the primary buyer was the uncle of my wife. He couldn’t afford to pay his share so we short sale the house last Jan. 09 and closed Dec. 09. We stopped paying our mortgage March 09. What are my chances of buying a house on my own say by Dec. 11 or Jan. 2012 with 10-20% down. My mid credit score is 652.
If you were going to purchase using a FHA loan, you’d have to wait 3 years. If you would like to use a Fannie Mae loan, you can buy with 10% down after 2 years if there were extenuating circumstances to the short sale. You’ll want to see our Waiting Periods post (http://iloanminnesota.com/2010/11/02/waiting-periods/) and our Extenuating Circumstances post (http://iloanhomemortgage.com/2011/03/what-are-extenuating-circumstances/). The credit score is good enough. The key to getting approved will be observing these timelines and getting an automated approval (http://www.google.com/search?hl=en&safe=active&q=define%3A+desktop+underwriter&btnG=Search).
hi, we are in the process of shortselling our house here in california. can a friend or relative buy the house and then we buy it back from him after the 2 years waiting time required by fha or can we buy a house now before we shortsale, will this options be considered fraud (we will not do it if it is fraud) we are current with our mortgage payment no late payment for more than 1 year the only late payment we had was when my wife went thru a complicated pregnancy more than a year ago and we did not do refi or take equity money from the loan all of the loan is purchase money we have 5/1 arm loan (80/20) two lenders if you could give an advice on what is the best and fastest way to purchase a house after a shortsale. can we do it in less than a yearafter shortsale?any advice will be greatly appreciated.
A friend or relative can certainly buy the house from you. My guess is that you’d continue to live there which would make that an investment property purchase subject to higher pricing and at least a 20% down payment. You could buy it back from them at a later date also. The waiting period for buying after a short sale using a FHA loan when there were lates on the mortgage or installment debt is actually 3 years and not 2. It is possible to purchase at 10 percent down using a Fannie Mae loan after 2 years if there were extenuating circumstances (see http://iloanhomemortgage.com/2011/03/what-are-extenuating-circumstances/). With the prior late on the mortgage, I don’t see how it could happen inside of 2 years. I’m sorry.
I closed on a short sale in December of ’08 due to being laid off from my job and moving to a new job to a new state. We were never late on our payments, stayed current all th way to end, but all banks we are talking to are telling us we have to wait the three years and some are talking longer. Our credit scores are good, (around the 700 range). Were not sure what to do..
It sounds like you should be a good candidate for the FHA program.
My husband did a short sale before we got married. He went through many letters and phone calls with the bank to get some type of options (loan modifications, etc.) to help him out in his 5 year no interest loan. Unfortunately, the bank stated there was no options at that time and they did not know when they have any. My husband was always on time with his mortgage payment and never missed a payment until the short sale which was requested through his real estate agent. She said in order for the short sale to be process he has to be at least 1 payment behind. He put the house up in March 2009 and closed the home in May 2009. He has been told since the house was sold quickly and was not passed 60 days, in foreclosure or in default that he could possibly buy a home now and not wait the 3 years. A real estate agent pulled his credit and did the numbers and he got pre-approved. We have heard many stories about buying a home after a short sale and it’s becoming real confusing. One person says this and one person says that. I just want to know one answer. The right one. We want to buy home now. Can we?
Mary Ann,
Short sales do not necessarily require that you be in default in order to get approved (http://activerain.com/blogsview/1421780/short-sales-do-not-require-a-delinquent-mortgage-imminent-danger-of-default-). I know that some mortgage insurance companies require it but it is not typically so. For FHA, they require that you be current on the mortgage and other installment debts at the time of the short sale if you are to be eligible for purchasing inside the 3 year waiting period. In your case, it looks like May of 2012 would be when you’d be eligible to purchase using a FHA loan. Fannie Mae allows a 24 month period if there are extenuating circumstances to the short sale (loss of job, divorce, serious illness) but they require 20% down at the 24 month marker, 10% at the 4 year marker and won’t give full eligibility until a 72 month waiting period has elapsed (http://iloanminnesota.com/2010/11/02/waiting-periods/).
I know this might be disappointing news but this is accurate information and it seems that you’re looking for the right answer.
Our short sale took place in April 2009 in Nebraska. We had to move for a job relocation, so decided to do a short sale because our home had been on the market for 2 years. We fell behind on our mortgage and ended up closing in April 2009. Our credit dropped to low 650. We had always had great credit and had never been late on any payments until our short sale. We are now wanting to buy a home in Illinois, and have had no luck with getting a FHA loan. Is there anything we can do to speed up the process, or do we have to wait more then 2 years to buy a home again?
If there were any late payments on the mortgage prior to the completion of the short sale, then FHA would require a 3 year waiting period. It would appear that you might have a little more than a year to wait just yet. I’m sorry Amy.
I find this article very interesting because I did a short sale in Aug 2010. Never late on any payment 30 plus years including the short sale. No bank will even look at me even though my short sale was due to an illness in the family. Credit score just above 700.
Nancy you might have a case for a FHA approval. Where are you looking to purchase a home?
Well where to start…To make a long story shorter I purchased a home with my then fiance for about 411K, subsequently she left and I was stuck with the house and 360K mortgage, a terrible loan (pick-a-pay) and it was coming current at the sum of 3000+ a month which was not doable for me. My bank agreed to do a short sale. I thought I was going to be unable to purchase again for several years. After doing some research I found this geeky guy Charles Dailey. Just so happens Charles is licensed in California along with several other states.. Well to sum it up I had good credit to begin with, never missed a payment on my mortgage and was current for the last 12 months on all other bills. Charles knew the rules better than the people who made them. Every time they said no he sent them a strongly worded email stating the rules and telling them to do their homework, because it was obvious he had. My short sale closed on 5-7-10 I stewed around for a few months, my first contact with Charles was on 9-3-10, and I closed on my new home 11-22-10. I cant give enough thanks to Charles for the work he put in and what he did for me.
As a person who has just gone through a shortsale, I found this posting very interesting. I had to sell my home as I was moving out of the area, so it was short sold. The only thing is that I was a few months late at the time I short sold it. My credit score today is 656, even though the short sale happed last July. I was hoping to get my credit score up and buy a new home in my new location by next July. What do you think my chances are in doing this? I think my original loan was conventional and I would be going VA with my next loan.
Rose,
I’m sorry to say this but being even a few months late at the time of selling short would extend the FHA waiting period from having none to a 3 year wait. I believe the VA waiting period is the same or similar. I’m sorry Rose.
Question, what if i was current but was told by my mortgage company that I had to be late or they would not consider a short sale. (my wife lost her job last December, and is still unemployed, so it was either a short sale or forclosure) I withheld January and February payments so we could close in March. I was told I could get an FHA loan a year later. My credit is still over 700. There are no other late payments, collections, defaults or anything else negative. Are you saying the mortgage company screwed me and I have to wait 3 years?! (if that is true then the housing market will not start to get better for at least 5 more years)
That is true.