This article will discuss buying a short sale home owned by a mortgage lender versus a traditional home listed by a homeowner. We would go in-depth on how to qualify for a mortgage if you had a prior short sale.
The Gustan Cho Associates team are experts in helping borrowers qualify for a home mortgage after a short sale.
The Gustan Cho Associates team has enjoyed handling the complexities of these sales and helping people affected by them rebuild their lives. Our loan officers are happy to share here some answers to common questions. In this article, we will discuss and cover qualifying and buying a house after a short sale.
Question And Answers on Buying Short Sale Home
Once the property sells at auction homeowner will have approximately 45-90 days to vacate the property in Illinois. Question: I am behind on my mortgage and unable to catch up. What can I do? Homeowners can ultimately continue not to pay, and the property in Illinois will go into foreclosure. The bank will serve homeowner notice, and an auction is scheduled.
Once the property sells at auction homeowner will have approximately 45-90 days to vacate the property in Illinois.
Not Being Able To Afford Property And Housing Payments
Question: I am not behind on my mortgage yet, but I can’t afford to keep the property
- However, what I owe is more than the property is worth
- Should I consider a short sale on this property?
The benefit of opting for a short sale instead of foreclosure is that it doesn’t wreak as much havoc on a person’s credit and gives the homeowner more time in their home. As long as a home purchase real estate contract is on the property, the lender will not schedule an auction in most cases. Lenders would be working on negotiating the transaction with a current buyer. Dealing with the lender in a short sales transaction takes time, usually longer than 45-90 days and sometimes up to two years.
Delays In The Short Sale Process
There are several reasons for this lengthy time frame. Some home buyers get tired of waiting during the approval period buying short sale home.
Many buyers think they can find a steal in buying a short sale, and when the bank comes back with a counteroffer they dislike, they walk away. Sometimes the lender has a lot of inventory in a particular area and is not adequately staffed to meet the demand for homebuyers buying short sale home
The files sit on a desk until someone gets to them. There are more reasons, but those above are the most common reasons for a delay in a short-sale transaction.
Buying Short Sale Home After Having a Prior Housing Event
The waiting period is longer if you were to purchase a home after a foreclosure versus a short sale on conventional loans.
Homebuyers can buy another property after a short sale sooner after a short sale and deed instead of foreclosure versus after foreclosure on conventional loans.
Under Fannie Mae and Freddie Mac Guidelines, there is a four-year waiting period to qualify for a Conventional loan After a Short Sale and Deed in Lieu. To qualify for a Conventional loan after a foreclosure is seven years.
How To Avoid a Short Sale Deficiency
There is no deficit judgment on a short sale versus a foreclosure. On foreclosure, the lender can sue you for the loss. A prior short sale has no impact on mortgage rates.
Credit scores, loan-to-value, and the type of property the borrower buys determine your mortgage rates on conventional loans.
The minimum credit score to qualify for a Conventional loan is 620 FICO. You can qualify for a Conventional Home Loan After a Short Sale in four years. In contrast, the waiting period is seven years to qualify for a Conventional Loan after a standard foreclosure.
How Long After a Foreclosure Can I Get a Mortgage?
A foreclosure could affect credit more than a short sale if there is a deficiency, especially if it is still outstanding. If the homeowner can’t repay, it could bankrupt the homeowner. Some people don’t see the difference between a foreclosure and a short sale, but in the long run, it can make a big difference with Conventional Loans but not government loans like FHA, USDA, and VA Loans.
Buying a House After a Short Sale Using an FHA & USDA Home Loan
Homebuyers can qualify for an FHA home loan after a short sale. Here are the qualification requirements to qualify for an FHA loan after a short sale:
- The minimum credit score of 580 FICO
- Three years waiting period after the short sale date is reflected on the HUD-1 Settlement Statement.
- A prior short sale has no negative effect on your mortgage rates.
- Lenders price mortgage rates based on the borrower’s credit scores and the type of property with FHA loans.
- There is a three-year waiting period to qualify for an FHA after the recorded foreclosure date and deed in place of foreclosure.
- FHA treats short sales, foreclosures, and deeds-in-lieu of foreclosures all the same
USDA loans have the same three-year waiting period to qualify for a USDA loan after a short sale, deed in lieu, and foreclosure like FHA loans.
Using a VA Loan For Buying a House After a Short Sale
VA loans are the best mortgage loan program for any home buyer. The U.S. Department of Veteran Affairs rewards our veterans who put in the required service with the opportunity to be eligible for VA loans.
The Department of Veterans Affairs realizes that many veterans can have less-than-perfect credit. The reason veterans have worse credit than civilians is due to being deployed overseas, whether it is during peacetime or wartime.
Hence, VA guidelines after bankruptcy, short sale, foreclosure, and deed-in-lieu are much more lenient than other government loan programs such as FHA and USDA. Veterans can qualify for a VA home loan after a short sale if they meet the minimum mandatory waiting period.
VA Guidelines After A Short Sale
This section will cover buying a house after a short sale using a VA home loan. A veteran borrower can qualify for a VA home loan After a Short Sale in Illinois after a 2-year waiting period after the short sale date. A veteran borrower with a Certificate of Eligibility (COE) can qualify for a VA home loan after foreclosure and deed-in-lieu of foreclosure. There is a waiting period requirement of two years after the recorded foreclosure date or deed-in-lieu of foreclosure. There are no minimum credit score requirements on VA loans.
Does a Short Sale Affect Mortgage Rates?
Most VA Lenders like to see at least 580 FICO credit scores from Veteran Borrowers. VA Loans do not have any debt-to-income ratio requirements.
As long as the borrower can get approve/eligible per AUS ( Automated Underwriting System), we can get VA loans to approve/eligible with debt-to-income ratios higher than a 60% DTI.
Sufficient residual income is the key to getting an AUS approval with a high DTI. A prior short sale does not play any impact on mortgage interest rates. Only credit scores and property type determine the borrower’s mortgage rates on VA Home Loans after a short sale.
Non-QM Loans One Day After Short-Sale With No Waiting Period
Non-QM loans are specialty mortgage loan programs that are portfolio loans and have no waiting period after a short sale to qualify for a home loan. Here is how NON-QM loans work. The lender holds portfolio loans and does not sell to Fannie Mae and Freddie Mac. A minimum 20% down payment is required—no waiting period after a short sale, foreclosure, or deed-in-lieu of foreclosure with NON-QM loans.
The Author of Buying a House After a Short Sale
Ronda Butts is the author of buying a house after a short sale. She is a licensed mortgage loan originator and a veteran, experienced, licensed real estate agent in Florida and Texas. Ronda Butts is a licensed loan officer at Gustan Cho Associates, Inc. She is also an associate contributing editor at Gustan Cho Associates.
Ronda Butts. She has extensive experience with government and conventional loans, non-QM loans, and alternative mortgage loan programs on owner-occupant, second homes, and investment properties. Ronda is an expert in helping borrowers during Chapter 13 Bankruptcy repayment qualify for FHA and VA loans.
How Long After A Short Sale Can I Get a Mortgage?
The waiting period after a prior short sale to qualify for a new mortgage depends on the loan program. Every loan program has different waiting period requirements.
Many ask how long I can get a home loan after a short sale. Ronda Butts is an expert short sales certified realtor. Ronda Butts is an expert negotiator dealing with lenders. Ronda Butts is also a real estate” consultant for GCA Mortgage FORUM.
Homebuyers who have questions about a short sale or are interested in buying a temporary sale home or listing your home via short sale and need help dealing with their lender, contact Ronda Butts at 1-407-460-7999 or email Ronda at ronda@gustancweren’t Ronda is a five-star realtor who is an expert in dealing with first-time home buyers.
Buying a House After a Short Sale Using VA Loans?
Thyou’ller is not if you can buy a house after a short sale, but when. Every loan program has a different waiting period requirement after a prior short sale. Homebuyers with a 20% to 30% down payment can qualify for non-QM loans one day out of short-sale, foreclosure, and bankruptcy. However, few homebuyers may have a 20% to 30% down payment.
Ronda Butts also authorizes many viral blogs at Gustan Cho Associates and subsidiary websites.
Gustan Cho Associates does not have any overlays on government and conventional loans. We go off AUS Findings. Veterans with a Certificate of Eligibility and have questions on qualifying for VA loans, don’t hesitate to contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays via phone, text, or email at gcho@gustancho.com.
