Okay, its’ happened to you, or a friend, or a family member, or a client…Life got in the way and everything went to H-E-Double-Hockey-Sticks fast.  So now what?  You “lost” the house, couldn’t sell-afford-whatever.  Hopefully…hopefully, you received advice or figured it out that a Short Sale (this is where you sale the home, with your lender approval, for less than current balance) or Deed-in-Lieu (where you transfer the ownership of your property to the owner of your mortgage in exchange for release from your mortgage) was an easier road than a flat-out-walk-away-foreclosure.

 

So let’s move on – pick up the pieces – pull on the boots and figure this out.  How long does it take to get a new loan for a home after a foreclosure or short sale?  There are many variables and below are some general guidelines.

 

All scenarios below assume the customer has re-established credit with good credit scores…

 

Previous SHORT SALE with new FHA purchase loan

  • Can purchase now with no mortgage default or late payments listed on credit report
  • 3 year wait if in default or late payments at time of short sale closing
  • Reduced wait time if borrower has re-established good credit and can show more qualifying circumstances (individual underwriter decision)
  • 2 year wait with 20% down
  • 4 year wait with 10% – 20% down
  • 7 year wait with less than 10% down
  • 2 year wait if able to document extenuating circumstances with more than 10% down

 

SHORT SALE with new Fannie Mae purchase loan

  • 2 year wait with 20% down
  • 4 year wait with 10% – 20% down
  • 7 year wait with less than 10% down
  • 2 year wait if able to document extenuating circumstances with more than 10% down

SHORT SALE with new Freddie Mac purchase loan

  • 4 year wait
  • 2 year wait if able to document extenuating circumstances

FORECLOSURE with new FHA loan

  • 4 year wait
  • 2 year wait if borrower has re-established credit and can document extenuating circumstances

FORECLOSURE with new Fannie Mae loan

  • 7 year wait from completed foreclosure sale date
  • 3 year wait if borrower can document extenuating circumstances.  Additional underwriting requirements apply
  • 7 year wait for 2nd home, investment property, or cash-out refi

FORECLOSURE with new Freddie Mac loan

  • 5 year wait from completed foreclosure sale date
  • 3 year wait if borrower has re-established credit and can document extenuating circumstances

 

**ALERT  “Extenuating Circumstances” are NOT applicable in most situations and is a judgment call for the underwriter.

 

**Disclaimer – The above is the opinion of Warren Whitaker.  Everyone’s situation is different.  Contact your professional for specific advice.

 

RESOURCES

Short Sale – How to Handle a Real Estate Short Sales

Short Sale Option As An Alternative To Foreclosure

Avoiding Foreclosure Resource Center 

Avoid Foreclosure | Stop Foreclosure | Foreclosure Help

How to Avoid Foreclosure Before It’s Too Late – Forbes

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