How long do you have to wait to buy again after a short sale? This is a question that many people have right now. While the guidelines can change, as of right now, here is the answer.
Have you lost your home to foreclosure or a short sale? If so, you may be wondering how long you have to wait to get back into homeownership. It all depends on a number of factors. First and foremost, it depends on how the property was lost.
If through a foreclosure, FHA and VA will provide financing once 3 years have passed provided credit has been re-established. Underwriters like to see 3 items of credit with 24 months of good payment history.
Conventional loans fall into 2 categories: Fannie Mae and Freddie Mac. Fannie Mae recently moved their waiting period following a foreclosure to 7 years! Freddie Mac's required waiting period to finance a home following a foreclosure remains at 5 years.
If the home was sold through a short sale, the waiting period is only 2 years with Fannie Mae and Freddie Mac if there is a 20% down payment (4 years with a 10% down payment).
Now here is where it gets interesting. If there were extenuating circumstances that forced the short sale, FHA will finance directly after a short sale! If there are not extenuation circumstances, the waiting period for FHA reverts to the same 3 year waiting period as a foreclosure sale.
What is the definition of "extenuating circumstances"? The answer is very subjective. The explanation must prove that there was no choice. For example, a person loses their job and they work in a specialized field. The only available job is in another city without a reasonable commute. The borrower is forced to sell while deeply underwater.
There are many cases where a borrower can qualify for a new mortgage while underwater on their existing loan. They must have a compelling reason for vacating the home. In addition, they must be able to qualify for both payments and have some cash reserves after the purchase. But it is a viable option for many.
One very important consideration: a short sale on a property in default 90 days or more is underwritten as a foreclosure!
So, the answer to the question...How long do you have to wait to buy again after a short sale, is all in the individual details.
If you or someone you know would like to talk more specifically about the details, we are here to help. OUr team specializes in short sales in Gilbert, Mesa, Chandler and Queen Creek Arizona. Call us anytime!
