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Are there any mortgage programs for people recovering from short sale (that allow purchase soon)?

Are there any mortgage programs that allow purchase sooner than 7 years for people who have gone through a short sale?
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March 15 2011 - Oakland
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We have a 2nd Chance Loan we can lend on in California that allows folks who had a foreclosure, short sale or deed in lieu to purchase one day after it is recorded. Feel free to reach out to me if you would like to talk in more detail.

Paul Watkins
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August 27 2013
The Fannie Mae 2 year rule is VERY hard to get approved if the homeowner was late on their mortgage at the time of short sale. Yes the rule exists, but there is a glitch in DU (Desktop Underwriter, Fannie Mae's automated underwriting engine) that makes DU read it as if it was a foreclosure and gives it a 'Refer With Caution' finding every time the back end MOP (Method Of Payment) codes on a credit report show a 5, 8, or a 9 (when there were late payments before the short sale).

Right now the only way to get around this is to petition the previous lender to change the way they are reporting to the credit bureaus. That has proved hard for many people to accomplish and the only luck I have seen is by having the credit repair company start the beginning stages of a lawsuit to get the lender to change the back end MOP code and pull a new credit report so that DU will issue an approval. It costs a few hundred dollars (at least) and can take up to 6 months.

The good news is that Fannie Mae has been aware of this issue for quite a while and is fixing it in DU version 9.1. The new version of DU will allow lenders to correct the MOP code issue and get an Approve/Eligible finding and do these loans for all the people that, per Fannie Mae's guidelines, should already qualify today.

DU 9.1 will roll out over the weekend of November 16th, opening up the doors to those with 20% to put down that had a short sale (with late payments) as recently as two years ago.

For those without 20% down FHA's new program, mentioned below, will allow those that suffered from a major economic event (loss of income of at least 20% of normal for at least 6 months) to buy in as little as one year from a short sale, with as little as 3.5% down, as long as they have fully recovered from the economic event and meet the other FHA loan guidelines. This will help a lot of people that had one or two people in the household lose their job due to the recession and were forced to short sale their home.

Sincerely,
Greg

Senior Mortgage Consultant - 17 Years Experience

Partners Mortgage
Roseville, CA

 
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August 27 2013
Yes there certainly are. The best option would be with Fannie Mae. With FNMA conventional financing you are only required to wait 2 years after the closing of the short sale. You can also look at FHA which has a 3 year waiting period. We also offer portfolio products that do not have a required waiting period but do require decent credit scores as well as a large down payment. I hope this information was helpful. Please let me know if you have any questions.
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August 27 2013
Last week HUD just announced a NEW FHA guideline that will allow many people to purchase a home after a short sale even if they were delinquenton their payments at the time without having to wait the full three years. 

Lenders are just now looking at this and wrapping their heads around it but we're in front of it. Anyone interested please let me know and I can walk you through it and figure out if the guideline would apply to your scenario.

Sincerely,
Greg
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August 26 2013
Here are the general guidelines that FHA and Fannie Mae follow when considering a loan after a short sale or foreclosure:

Short sale with FHA Loan

    Can purchase right away with no mortgage default
    3 year wait if in default at the closing (most common occurrence)
    Reduced wait if the borrower has re-established good credit and can show extenuating circumstances

Short Sale With Fannie Mae Loan

    2 year wait if the borrower puts 20 % down
    4 year wait if the borrower puts between 10% to 20% down
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August 25 2013
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No matter what it will always haunt you....
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March 18 2011
FYI,

You will get several different answers depending who you talk to. But here are the facts. If you are a Veteran, you only need to wait two years after the short sale or foreclosure or Trustee Sale. That's straight per VA Guidelines, that is of course if the short sale or foreclosure was not a VA Guaranteed Loan. If you had extenuating circumstances such as a loss of business, job, or death in the family, exceptions can be made to purchase as soon as (1) year.

Now here's the zinger! If you had a really sharp Realtor (which is rare) who listed your home and they told the following: You are in luck!

1.) If you are or were able keep you mortgage current for the last 12 months in addition to your installment debts, you can qualify of a FHA loan. (Unfortunately, that is not the case with most people. The average Realtor tells their client that they MUST be behind in order to qualify for the hardship. It turns out that is not quite true).

2.) Did not take advantage of declining markets by perusing to purchasing a similar or superior property due to market conditions. (If you legitimately has a hardship where you were forced to downside in value, you're okay!)

See for yourself at the HUD Website go to the bottom of the page Paragraph L.




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March 18 2011
Two years with a 20% down payment on a conventional loan and 3 years with a 3.50% down payment on an FHA Loan.  Most importantly, start rebuilding your credit during this wait period.


I hope this helps.
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March 17 2011
Profile picture for Clearpoint
I think you use of the word recovering is important.  Wait until you have recovered to ensure you will not have to be in the same situation again regardless of the length of time a lender tells you will have to wait. 
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March 15 2011
It shouldn't take 7 years to qualify (I think it's 7 years for a foreclosure/bankcrupcty, but 2 years for short sale)

But your credit-worthiness will be scrutinized as part of your new prequalification.

During the time since you did a short sale, what have you done to repair your credit?

1. Did you pay down your other obligations?
2. Did you pay on time
3. Did you control your expenditures (i.e. no large ticket items that need to be paid off)

If loss of income was the reason for the short sale, have you managed to overcome that difficulty in such a way that you now have good steady income?

In addition to mortgage lenders, you may also want to see a credit counselor who can guide you in repairing your credit so that you can qualify to buy another home soon.

Good luck!
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March 15 2011
Pretty much every type of mortgage will allow a purchase in less than 7 years. Two to three years is the norm... Two years with 20% down for conventional, three years for FHA (minimum down payment would be 3.5% at this time).

Sincerely,
Greg
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March 15 2011
FHA allows 3 years after short sale.  They will also allow a few exceptions to right away if you have no lates on the short saled property and have a good reason for having to sell.  Like job transfer, etc
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March 15 2011
Profile picture for wetdawgs
In most cases, if you've rebuilt your credit and have an excellent down payment, you are eligible to be considered for a mortgage in two or three years after the short sale.
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March 15 2011
 
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