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I live in California and short sold my house 2.5 years ago. I was unable to get approval for the short sale until I missed payments. The house was successfully short sold 2.5 years ago and part of the settlement was a stipulation where I had to pay over $10K (good faith payment) to get the approval...and I did it.
I recently went to get approval for a loan and was told that there is a new "score" instituted in Nov. of 2012 that assign's a score to the short sale. Our new loan agent stated that we cannot get a loan until we get a "reported in error letter" from our previous lender Wells Fargo. I called Wells Fargo and was told they will not change the score (9 - the highest) because I missed payments and the short sale is marked as a foreclosure for that reason. I was in negotiations with Wells on the short sale before I even missed payments and then they stated that they wouldn't approve a short sale unless I missed payments. In any case I feel that it is unjust for Wells to retain this score and stop me from getting a new loan when we legally settled our debit with them. On my credit report it shows as "settled for less than full amount". How do I proceed and get this cleared? PLEASE HELP CALI AGENTS! I've been told by my loan agent that there are many others in the same boat...what do we do? We settled our debit, we should not be further punished...
Under certain circumstances such as no missed payments during shortsale and specific reasons for shortsale such as forced employment relocation, it is possible to get a loan if you meet all the qualifying requirements, immediately.This of course is the rare exception. The general guidlines that we see under shortsale circumstances of short sale where payments are missed and hardship is not the perfect storm is 3 years under FHA and 5 years under conventional. Of course you have to meet all the requirements such as income, debt and fica scores.Remember things are always changing and evolving so it's always a good idea to create a livable budget and prepare yourself for opportunities in the future as they arise.
Pretty black and white (well except for the gray areas :-) )
Here are the Fannie Mae Guidelines:
There are also USDA loans available in designated rural areas for folks that qualify with certain income restrictions:
After that you're dealing with what banks refer to as non-conforming loans. In this situation the bank will make decisions based on their specific guidelines. That said, keep in mind that many banks will still not lend after short sales because of the risk involved.
There are a couple of things I see time and time again when people approach me in this situation. First of all, I still have yet to meet a client who had no delinquency on their mortgage history prior to the short sale. The story is always the same. That the bank refused to negotiate without the homeowner being delinquent in the first place. Then the other issue usually takes place which is the lender starts foreclosure proceedings. When that happens, and the borrower goes to purchase another home, they are now in a much different credit situation with the foreclosure proceedings on their credit report.
What you can do if the foreclosure proceedings are reported is contact the lender and go over what happened while the short sale was in progress. If they are willing to give you a letter stating that foreclosure proceedings never started then you can send copies of that letter to the three bureaus and they will update the tradeline. If the lender refuses, you can try contacting a credit repair agency. They usually know how to apply more leverage in this situation, although there will be (varied) costs involved.
When approached by borrowers in these situations, what I always offer is a pre-approval loan application. It's free and usually takes about 10 minutes. I collect the usual income and asset docs. If the borrower is putting less than 20% down then I get a letter from them explaining the circumstances surrounding the sale. It should explain what happened, why it happened and why it shouldn't happen again. If they people sold short due to market conditions, that's usually not acceptable. However, people do have extenuating circumstances (ie: loss of income, unexpected one time expenses etc) so, that's what the underwriter is looking for. Be prepared to offer third party documentation to prove your case.
Wetdawgs is 100% correct. There is not a 1 size fits all answer to this question. Also note that each lender can have overlays to the actual agency guidelines. The answer may vary lender to lender. Ask the lender you are working with if their guideline differs from the agency guideline and if they don't know what you are talking about, move on to another loan officer.You don't know what you don't know applies to loan officers as well.
Fannie Mae guidelines are posted online and do allow for divorce and job loss as Extenuating Circumstances (FHA does not count the same)Extenuating circumstances are nonrecurring events that are beyond the borrower's controlthat result in a sudden, significant, and prolonged reductionin income or a catastrophic increasein financial obligations. Examples of documentation that can be used to support extenuating circumstances includedocuments that confirmthe event (suchas a copy of a divorce decree,medical reports or bills, notice of job layoff, job severance papers,etc.)
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