Although homeowners might think hard about giving up a home they no longer can afford, that should not discourage them from home ownership in the future. The following information will provide some basic information to satisfy this question (most guidelines are subject to change from time to time, it is best to contact an experienced local loan officer for further details).
VA loan guidelines
If you are a veteran or a qualifying civilian, you can apply for a new home loan through the U.S. Department of Veteran Affairs. These loans, known as “VA loans,” carry a mandatory two-year waiting period that borrowers must meet before applying for financing following a short sale. It is recommended that you check with an experienced local loan officer for credit and income requirements before purchasing your next home with a VA loan.
Fannie Mae guidelines
Fannie Mae, a government program, either purchased conventional home loans or exchanges the conventional loan notes for mortgage-backed securities. Fannie Mae will not purchase a loan unless the lender imposes a two-year waiting period on borrowers who wish to finance a new property following a short or “pre-foreclosure” sale. The two-year waiting period is mandatory for all borrowers, and the circumstances surrounding the short sale do not shorten the two-year waiting period.
For any consumer who plan to finance their new home with a loan through the Federal Housing Authority, also known as an FHA loan, the requirements after a short sale vary considerably from conventional lending guidelines. If a homeowner was current on their mortgage payments and payments on all other loans during the entire short sale transaction, this homeowner can purchase any home immediately using FHA financing adhering to the mandatory waiting period. NOTE: If, however, you were in default when you sold your home or you have requested a short sale from your lender with the sole intention of taking advantage of a declining housing market, you must wait the mandatory three years of the short sale before you become eligible for a new FHA loan.
The amount of time you must wait before buying again usually is determined by the underwriter of a local bank/mortgage company at the time of a new loan application submission.
Like everything in life, there are exceptions. One of my clients lost their home through a short sale when their first child was born prematurely. Both parents put their life on hold to be with the child at the hospital around the clock. You can imagine the mountain of medical and household expenses that went unpaid while there was no income coming in. This couple applied for a home loan in less than two years and was able to secure financing. It took them all of two years to put together a strong medical hardship case to get into their next home just one year faster than anyone else.
If you have been discharged from a bankruptcy and you did not previously own a home, you can buy two years from the date your bankruptcy was discharged. Waiting the mandatory three years is just one of the considerations. The other considerations you still need to satisfy are the credit and income and down payment requirements. Your lender will verify these criteria before giving you the approval to purchase your next home. Your loan officer will demand that you must not be late on any loan payments after a short sale, in order to prove your credit-worthiness. It would be wise to follow closely their financial advice and re-build your credit after a short sale. The sooner you get rid of a bad loan, the sooner you can achieve financial fitness again.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.