Qualifying for a mortgage to buy a home again after a short sale in California is something you should plan for before you short sell your home. In California, the required waiting period or how soon you can buy again after your short sale will depend on the mortgage loan program you qualify for.
It’s Important to Know When You Are Eligible to Buy Again After Doing a Short Sale
There is so much outdated and misinformation ‘out there’ about the waiting period or how soon you can qualify for an FHA, VA, USDA or Conventional loan after a short sale. Making decisions based on wrong information can have a big impact on your life.
If I had a dime for every time I heard that some best friend’s uncle, who knows a barber, who has a niece, who was in default but still bought a home immediately after short selling, I’d be a rich man. (for real)
Many People Are Unaware
Most people are unaware that a short sale, in many cases, is treated the same as a foreclosure in the eyes of the agencies who determine the mortgage guidelines.
Or, that the amount of your down payment can reduce the waiting period before you can qualify and by again after short sale.
Why Mortgage Banks Make You Wait to Qualify Before You Can Buy Again After Short Selling Your Home
Other than to penalize and make you feel shame, the agencies (Fannie Mae, Freddie Mac, FHA/HUD, the VA) and too big to fail banks are trying to prevent people from selling their home that has a $350,000 mortgage on it, and then turning around and buying that same home for $200,000. The banks don’t want to take a loss. That is called a buy and bail scenario.
Waiting periods to qualify for a mortgage and buy again after a short sale in California.
FHA Loan Qualify to Buy After Short Sale
- Three (3) years from the date the short sale was completed when it is a distressed short sale. FHA calls a distressed short sale a pre-foreclosure and applies the same waiting period as a full blown foreclosure….for now anyways.
- No waiting period if borrower had no late payments on any mortgages or consumer debts with-in the the 12 months preceding the short sale AND they are not short selling to turn around and take advantage of the declining market. If there were late payments prior to and leading up to the short sale, acceptable extenuating circumstances will be required.
- See HUD Mortgagee Letter 09-52 for FHA short sale guideline
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VA Loan Qualify to Buy Again After Short Sale
- Two (2) years from the date the short sale transferred to the new owner.
- No waiting period if borrower had no late payments on any mortgages or consumer debts with-in the the 12 months preceding the short sale AND they are not short selling to turn around and take advantage of the declining market. If there were late payments prior to and leading up to the short sale, acceptable extenuating circumstances will be required.
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USDA Rural Loan Qualify to Buy Again After Short Sale
- Three (3) years from date the short sale transferred to the new owner.
- Less than three (3) years from the date the short sale was completed and transferred back to the new owner if there was an acceptable extenuating circumstance and had no late payments in the last 12 months.
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Conventional Loan Qualify to Buy Again After Short Sale
- Seven (7) years from the date the short sale as completed when making down payment of less than 10%.
- Four (4) years from date short sale was completed with a 10% down payment.
- Two (2) years from the date the short sale was completed with a 20% down payment
Details are here ==> Fannie Mae buy after short sale announcement 08-16
What Next?
Get ready to buy soon after your short sale and speak to mortgage professional who really knows their guidelines, is experienced getting buyers approved, and has access to multiple banks and investors to fund a loan to avoid any bank/investor overlays. (that’s me by the way)
Get Pre-Approved to Buy After Short Sale
Related Posts of Interest:
- Extenuating Circumstances to Qualify and Buy After BK, Short Sale, Foreclosure
- Know the 3 Different Types of Loan Approval
- Mortgage 101 – Understanding Credit
- What Interest Rate Do I Qualify For?
