Profile picture for RodTod11

How soon can I buy after a short sale?

I was forced into a short sale due to a divorce. It was court ordered, I worked with the lender and the home sold in Jan 2010. Because of the amount of support ordered I was unable to make the payments on the house during that period. I also stayed in communication with the lender on that problem. On my report it simply states the house was sold as agreed for less then owed. I did see reports of the late payments on the house.  My credit score is 690 and I have no other credit issues or late payments. I would like to buy a home in the 80K to 120K range in a 55+ community. How long do I have to wait, how much down would be required etc???
  • June 23 2010 - Sun City
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Answers (12)

You could buy today with a  hard money loan at 55% ltv requiring you to put at lease 45% down at a 9% rate APR 13%. For conventional or conforming products with better rates and terms you need to wait at least 2 years.
  • December 24 2010
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Profile picture for JDERP
Rod,
The quick answers are as follows: After a short sale the borrower can not borrow again for 2 years. With a foreclosure the borrower cannot borrow again for 7 years. So the short answer for your short sale is 2 years and 1 day. That's when you can go to the settlement table with a new mortgage assuming you get approved. You may pay a slightly higher rate b/c of the previous short sale but I'm not positive about that. Best of luck.
  • December 23 2010
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We issue loans to borrowers after a short sale.  Get into touch with me, I can help you.

Ken Burrows

[Contact info removed by moderator]
  • December 22 2010
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Profile picture for Netizen
I'm not a real estate professional. As a typical homeowner, I believe the short answer is 10 years before the event drops off your credit history. However, these days, credit is only but one mitigating factor in buying a house. Have you looked into seller financing? Retirees having difficulties selling will often consider carrying the note on a payment schedule.
  • June 25 2010
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Profile picture for Keane Ng
Aaron,

Are you claiming you can do FHA loans outside of FHA guidelines or that you're one of a handful of lenders who will allow a purchase following a short sale that wasn't late?  The FHA guidelines are the same for all lenders.

FHA's guidelines for purchasing after a short sale state that the homeowner must wait 3 years following a short sale if the mortgage was in default.  Almost all short sales are in default at the time of the short sale.

The only time FHA allows a buyer to buy following a short sale without a waiting period is if they were not in default at the time of the short sale and if they meet the following criteria:

1) Cannot be taking advantage of declining market conditions
2.)   Purchase, at a reduced price, a similar or superior property within a reasonable commuting distance

They must be current on their mortgage AND OTHER installment debts at the time of the short sale and if the proceeds from the short sale serve as payment in full.

This is detailed in HUD's Mortgagee Letter 09-52

This means that any FHA lender, if they chose to, could allow a buyer to buy following a short sale if they meet the criteria listed above. 
  • June 25 2010
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Profile picture for BobPhillipsRE
RodTod11,  It will probably be about a 2 year wait, with most lenders.

Here's another possibility, maybe two.  You might look for a lease option in the community you're targeting - with a 2 year deadline. ( You could end up buying the house.)  Do so without a large option deposit, however.  More like a 2 year lease with a first right to purchase the property at the end of the lease.

Additionally, many owners in retirement communities own their properties free and clear - without a mortgage.  Many such owners would consider carrying a first mortgage for you at an attractive interest rate - say 5% - with 10 or 20% down.  That would be something you could get into right away.

Have that seller carry the 1st mortgage, for 5 years, with no prepayment penalty, so that when the time comes to be able to qualify for a 15, 20, or 30 year mortgage, with a normal lender, you can get the new loan, cashing out the seller.
  • June 25 2010
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Profile picture for BobPhillipsRE
NTETS said: "if it was a fannie/freddie/fha loan... they were throwing this 7 year number around last week"

That was in the special circumstances where someone who could actually make the payments - who don't really have a hardship - elected to undergo a strategic default.

Lenders are going to clamp down on this burgeoning practice, and rightfully so.
  • June 25 2010
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Profile picture for Mr Caveat
if it was a fannie/freddie/fha loan... they were throwing this 7 year number around last week
  • June 25 2010
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Short sales do NOT disqualify you for loans with our bank. We do require you meet certain guidelines (for instance, all payments need to have been made on-time for 12 months prior to the short sale).  If you would like to contact me, I can go over our requirements for qualifying.  As for down payment, we can offer you FHA financing with as little as 3.5% down.

  • June 25 2010
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RodTod11

You have a very unique circumstance in that you were forced into the short sale due to the divorce court order.  My suggestion would be to contact a mortgage professional to discuss your particular situation.  Present them with a copy of the court  and all other relevant paperwork for them to take to the underwriter.  

In your case it will benefit you to work with someone who has direct access to the underwriter.  If you'd like you can contact me via Zillow.
  • June 23 2010
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Profile picture for Keane Ng
3 years.  Your score is fine.  Keep improving your score.

If your mortgage shows no lates, you could buy now.  Did it ever go more than 30 days late?

FHA will be the first lending source you can get to buy.  3 years from the short sale or no wait if your mortgage doesn't show late on credit.  Your circumstances are perfect for the no-wait period but you would have to have no late payments.

Here's more info on using FHA's new guidelines on buying after a shortsale.

FHA requires at least 3.5% down.  If you're planning on long term ownership, you may want to save up 10% down and get a FHA 15 year loan.  FHA does not require mortgage insurance on 15 year loans with a 10% down payment.  Since you're looking at a 55+ community, I thought you may want a loan that would be paid off in a relatively fast time.  This would be a good option.

FHA will not make you pay a premium for their mortgage due to how recent your short sale was.  As soon as you meet their guidelines for short sale seasoning, you'll get the same rates as everyone else with that credit score.
  • June 23 2010
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Profile picture for wetdawgs
A couple of years.  You get better rates with a higher credit score.

  • June 23 2010
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