After a short sale, how do you acquire a home?
Have you used a short sale to sell your home? You have the option to make another purchase.
If you bought a house between 2006 and 2011, your home’s value likely dropped from all-time highs to all-time lows. Short sales accounted for 22% of all property sales in the United States in 2012.
By 2010, about a quarter of all homeowners in the United States had underwater mortgages, meaning their loan balances were higher than their home’s worth.
However, a large number of those homeowners are considering purchasing a home.
When you sell your house through a short sale, your homeownership dreams don’t have to end.
What is a short sale?
A short sale is a real estate transaction in which the seller sells the property for less than the
A short sale is when a home is sold for less than the amount owed on the mortgage.
When there are multiple lienholders on a property, such as a first and second mortgage, all lienholders must agree to accept a payment-in-full that is less than the total amount owed.
A short sale may be preferable to foreclosure for homeowners since it causes less credit damage. After a short sale, you could be able to purchase sooner than after a foreclosure.
Is there a time limit on buying a house following a short sale?
The length of time you must wait for a short sale is determined by the type of loan you are looking for. Government-backed mortgages are, on average, more lenient than traditional mortgage criteria.
However, if you make a significant down payment and pay a higher mortgage rate, certain non-prime programs will approve you one day out of foreclosure.
Following a short sale, a non-QM mortgage can be obtained.
Non-QM mortgage loans provide a broader range of underwriting criteria and might be a good option for first-time homebuyers.
Non-QM loans have varying credit standards, although many lenders give them as soon as one day after a short sale is completed.
Non-QM financing programs often have higher interest rates and higher down payments. Consult a non-QM mortgage lender to learn more about the qualifications.
“There will be no waiting period,” says the Federal Housing Administration.
Following a short sale, the FHA allows buyers to qualify for a mortgage right away. It’s worth noting, too, that the FHA’s “no waiting period” policy comes with a few stipulations.
If:
- You were not in default on your previous mortgage at the time of the short sale, and you had paid all of your mortgage payments on time in the 12 months leading up to the short sale.
- If your mortgage was in default at the time of the short sale, you must wait three years before qualifying for a new loan via the FHA.
FHA mortgage after a short sale
Following a short sale, you may qualify for an FHA loan.
The three-year waiting period for FHA loans begins on the following date:
- If the prior mortgage was also an FHA-insured loan, the date when FHA paid the claim on the short sale.
- The three-year waiting period does have some exceptions.
You may be able to qualify sooner than the three-year timeframe if you can establish that the mortgage failure was caused by extenuating circumstances.
Extenuating conditions include, but are not limited to:
- Legal separation (in certain cases)
- Serious illness or death of a family member, usually including the primary wage earner; or Job loss, again involving the key income earner.
To take advantage of them, you’ll need documented proof.
After a short sale, a conforming loan is issued.
The time it takes for a Fannie Mae or Freddie Mac mortgage to become available varies depending on the situation.
Following a short sale, homebuyers with a 20% down payment may be eligible in as little as two years.
A four-year wait is in store for those who put down 10%.
Homebuyers with less than a 10% down payment will have to wait seven years from the date of the short sale to purchase a home.
There are certain exceptions to the standard loan waiting periods. You’ll need a 10% down payment and documented proof that the short sale was caused by extenuating circumstances to be eligible for these exclusions.
After a short sale, what do you do?
A short sale can harm your credit, albeit it is not always as bad as a foreclosure. It all relies on the terms you and your lender agree on. If the homeowner pays partial restitution to cover some of the lender’s losses, some lenders will not report it.
If the short sale is listed as a major delinquent or unfavorable item on your record, it can stay there for up to seven years.
Prior to applying for a mortgage, homebuyers can take a number of proactive steps.
Maintain an eye on your credit score.
“Paid/closed with zero balance” is the most common entry on your credit record for short sales. “Settled for less than complete balance” may also be written.
Short sales are sometimes misreported by banks. It’s critical that the credit bureaus receive proper information from your short sale.
Get your credit back on track
Opening new credit accounts and paying them on time for at least a year is the first step towards restoring your credit. Keep all accounts open and make monthly payments in full.
Secured credit cards are a good option if you can’t get a gas card or another minor credit card.
Secured credit cards might be an excellent substitute for standard credit cards. But be cautious when picking one. Some companies simply take advantage of high fees while providing minimal value. Secured cards will only help you rebuild your credit if they disclose your transactions to the credit bureaus.
As a “approved user,” you can also improve your credit rating. That you have outstanding friends or family who are willing to add you as an authorized user to their accounts.
You don’t utilize their accounts, and you don’t even need to know who they are or what account number they have.
Recognize your credit rating.
According to a recent survey, 40% of customers have no idea how important credit scores are when it comes to lending decisions.
When it comes to setting your interest rate, your credit score is one of the most crucial factors.
Payment history, account age, account kinds, and the amount of credit queries are just a few of the criteria that go into determining your credit score.
Aside from that, it’s critical to comprehend the significance of credit consumption.
Keep your credit card balances at or below 30% of the maximum limit on all revolving credit accounts.
How Much Do Mortgage Rates Cost Today?
Even if you’ve just had a short sale, you could still be able to get a mortgage with a low down payment, low rate, and cheap monthly payment.
Now is the time to find out what mortgage rates are currently available. To get started, you don’t need a social security number, and all quotations include real-time mortgage credit ratings.
