Getting mortgage after Short Sale
Q: I am getting on with my life after recent short sale, and want to buy a house. Can you please shed some light on how to get mortgage after short sale. My banker has no idea and there is much conflicting information on the web. Some say it is 6 months if your credit score is over 620, other say it is going to take 5 years and so on.
A: The main reason that the correct answers are hard to find, is because the lending guidelines are very fluid and changing too often. That and some obviously wrong information that can totally mislead you. In general, getting mortgage after short sale is quite difficult. And most sellers won't have credit score anywhere close to 620 after short selling, I can tell you that. The most important thing to understand however, is that often Short Sale is treated almost exactly as foreclosure by Experian, Equifax and TransUnion.
When it comes to getting mortgage after short sale, the rules between FHA and Fannie Mae differ quite a bit. Again the situation is fluid and the recently amended FHA rule is much friendlier now. If you sell your home short due to extenuating circumstances and have not been late on payments, you may be eligible for a new FHA mortgage almost immediately. Partial loss of income, inability to afford your home, getting sick may fall very well under such extenuating circumstances. The No Late Payments condition also includes other installment payments,
- all mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale
- all installment debt payments for the 12 month period preceding the short sale were also made within the month due
If you however decide to simply take advantage of declining market conditions to
- dump your house and/or buy another one in the area
- or you were late within 12-month period prior to a short sale
you must wait at least 3 years to obtain an FHA insured loan
Getting mortgage under Fannie Mae or Freddie Mac policy is pretty straight forward and tough - a minimum of 24 months needed to reestablish credit after short sale to get a conventional mortgage. Fannie Mae and the banking industry define a Pre Foreclosure Sale and a Short Sale as practically the same thing. Banks and other mortgage lenders actually issue home loans, whereas Fannie simply sets the conditions under which it will purchase loans from those banks and wholesalers. And 24-month waiting period for getting another mortgage after short sale is one of the conditions. No bank or wholesale mortgage lender will approve a conventional mortgage loan which is not sellable to Fannie Mae.
A word on credit score. We are getting emails with people asking how much a short sale would affect their scores. The thing is, it is often hard to predict because not only there are so many different factors involved from your side - like how good was the credit, how many house payments were made late or were you late with other bills, but how a short sale is reported by the lender to Experian, Equifax and TransUnion which is often reported as Account Settled For Less Than Owed. To get a basic idea, visit What affects credit score according to FICO.
Sun Apr 18, 2010 01:04PM | Copyright: www.bad-credit-advisor.com | More in Mortgage | Comments (0)
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