Qualify and Buy a Home Again After a Short Sale in California

Qualifying to buy a home again after a short sale in California is something you should plan for before you short sell your home.  The required waiting period to be eligible to buy again after your short sale will depend on the mortgage loan program being used and your circumstances.

Blog Post updated 8/17/2013 ==> FHA just announced a new Back to Work – Extenuating Circumstance that will allow you to qualify and buy again in as little as 12 months!

Know When You Are Eligible to Buy Again After Doing a Short Sale

There is a lot of outdated and misleading information about the waiting periods or when you can qualify for an FHA, VA, USDA or Conventional loan and buy again after a short sale.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.

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 (except USDA).

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 government agencies (Fannie Mae, Freddie Mac, FHA/HUD, the VA) do not want every home owner doing a strategic walk away short sale just because they are upside down.  No lending institution or agency wants to lose money by encouraging a borrowers do a buy and bail, right?

Waiting Periods to Qualify 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

______________________________________________

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.

______________________________________________

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 previous 12 months.
• USDA technically has no published mandatory waiting period to buy again after short sale and gives the lender discretion to approve with an adverse credit waiver.  Will need a minimum credit score of 660 and cannot have any other risk factors (payment shock, ratio waiver, work history).

______________________________________________

Conventional Loan Qualify to Buy Again After Short Sale

• Four (4) years from date short sale was completed with as little as 5% 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?