If you were one of the many homeowners who opted for a short sale, you may be emerging from one of the most stressful times in your life. If you are now ready to purchase another home, working with an experienced mortgage team can reduce your stress and help you to find a mortgage tailored to your situation.
If your short sale was triggered by an extenuating life circumstance, e.g. death of a spouse, job loss, medical bills, job layoff, etc., you may qualify for an extenuating circumstances exception and avoid the mandatory waiting period before you can apply for a new mortgage. A written explanation must support any claim of extenuating circumstances, and document that the borrower had no reasonable options other than to default on his or her financial obligations.
Each lending institution defines extenuating circumstances differently; for example; the FHA loan has the strictest definition. It must be an incident that causes the primary wage earner to have a significant loss of income that leads ultimately to financial hardship. Conventional financing uses a more lenient definition as per Fannie Mae Guidelines. They define extenuating circumstances as a nonrecurring event that results in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations that are beyond the borrower’s control.
If an extenuating circumstance is not the reason for the short sale, a mandatory waiting period may be imposed. This serves a dual purpose. It is a way to demonstrate to lenders that you will not have a similar challenge with the new mortgage you are seeking, as well as allowing time to rebuild your credit and your confidence so you can flourish in your new home.
The length of time you must wait before you are eligible to obtain a mortgage after a short sale is determined by the type of financing for which you are applying.
FHA Insured Financing: the application date for your new mortgage must be at least 3 years from the date your name was removed from the title in the short sale. VA Guarantee, Veteran benefit financing: the application date for your new mortgage must be at least 2 years from the date your name was removed from the title.
Conventional Financing: the date of the credit report pulled for your new loan must be at least 4 years from the date that your name was removed from the title.
USDA Rural Development Loan: the date of the credit approval for your new loan must be at least 3 years from the date that your name was removed from the title.
Mortgage Included in Bankruptcy If your mortgage debt was discharged through bankruptcy, conventional and USDA financing allows you to use the waiting period from the discharge date of the bankruptcy.
Experienced Mortgage Brokers
If you would like to explore buying a home after a bankruptcy, short sale, foreclosure, or deed in lieu of foreclosure, please contact us; your employer-sponsored home ownership program at 1-800-376-4603.
The staff at Advantage Home Plus has a full stack of mortgage programs to fit the needs of the diverse range of clients and are here to assist you in your quest to regain home ownership.