Dear Shawn,
My husband and I did a short sale about a year ago and we really thought we would never consider owning a home again. The emotional toll it took on both of us and our long-term marriage was the worst nightmare. Now after a year we are talking about the idea of buying a home. We would appreciate any information on how long we will have to wait in the event we do want to buy a home soon.
Answer:
This is truly a tragic situation and more than several folks are facing the same issues.
However, this does not minimize your nightmare, or anyone else in this situation.
Since you and your husband have made it through the short sale process, let us look at some options of the possibility of returning to the homeowner market.
First, let’s look at the definition of a short sale. A short sale is when the lender or lenders agrees to accept a price and allow the home to sell at the current market value (for less than what is currently owed on the home).
The difference is what the lender is getting shorted by not receiving the full payoff on the loan. In addition, the lender or lenders typically agree to cover the closing, real estate commission, and sometimes fixes up the home and so on.
To be clear, the homeowner does not pay these fees no matter how much the loan debt.
There have been rare cases of home lenders granting the homeowner a complete short sale without ever being more than 30 days late on their credit report (they keep current on the loan payments).
In this unusual situation, the homeowner might be eligible to purchase a new home within several months of that close of escrow.
Now we can look at the typical short sale success case with late payments or non-loan payments, with respect to the period within to purchase a home again using the loan sources below.
Keep in mind that a good rebuilt credit score is essential to obtaining a new mortgage.
FHA loan: Three-year wait period.
Fannie Mae / Freddie Mac:
• Two-year wait with 20 percent down.
• Three-year wait with 10 percent down.
• Four- to seven-year wait with less than 10 percent down.
• Two-year period if the borrower can show extenuating circumstances with 10 percent down.
Each short sale case is different and so are the reasons for the short sale from the beginning. When selecting your professional lender or mortgage person, keep in mind that not all the lender sources you talk with will view the same information criteria in the same light.
Look for a professional in the lending field that you are confident can take care of you and spend the time to help your particular situation.
Together you will check on your credit score, and maybe create a plan with the idea of helping to boost your credit score. Do not be discouraged if one lender says no, push onto the next.
Remember, the lenders do not approve short sales because they feel sorry for you. They are aware of the costs that accumulate while waiting for a house to go to foreclosure and have several added costs with time running against their clock.
Short sales may be a good option for some homeowners, but may not be the best result for other homeowners.
Be wise and obtain all information before considering a short sale. Be clear to know how your particular outcome may unfold.
You may want to contact your local accountant, real estate attorney and financial planner for more information. Best of luck to you.
This information is believed to be accurate and it is intended to provide a general answer. For legal advice, contact your attorney.
About the Author
Shawn Kaplan is an active, 50 state Licensed loan officer with Access National Mortgage.
Email Shawn at skaplan@accessnational.com or call 615-426-3182.
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