A Loan After A Short Sale

Can I Qualify for a Loan After A Short Sale?

In a word…YES.  While losing your home is never an easy process you can qualify for a loan after your short sale. Short Selling your home is generally the least disruptive method for returning your home to the bank. As a result, your credit scores will typically recover much faster and your ability to become eligible for a new home loan will be faster compared to a foreclosure.

In some cases, your may become eligible to Own Again After a Short Sale in as few as 12 months.

 

What is a Short Sale?

There is a common misconception that a short sale is a real estate transaction. A short sale is actually a debt settlement procedure which result in the sale of real property. If the bank is willing to accept the proceeds from the sale of the real property as settlement for the debt, a short sale will generally occur. In many cases the bank(s) will accept these proceeds as full settlement. Short selling a home will negatively impact your credit but in most cases, it is the least damaging.

Pre-Foreclosure sale vs. Short Sale?
Most borrower’s who sell their property to settle their debt with the bank are delinquent on their loan and the bank has like begun the foreclosure process. This is known as a Pre-Foreclosure sale. A Short Sale is a transaction which the borrower sells their property to settle the debt but made all the payments on time.

A Loan After a Short Sale: FHA Loans

Getting an FHA loan after a short sale is one of the more common scenarios. FHA loans after a short sale have a waiting period that is less than Conventional but more than VA or USDA loans. The nice thing about FHA loans is that you don’t need to be a Veteran (VA loans require this) and you can buy your home in any area (USDA loans require that the property is eligible for a USDA loan).

FHA loans require that you pay up front mortgage insurance as well as a monthly mortgage insurance, but they are one of the most popular (and best) options for getting a mortgage after you have been through a short sale.

The typical waiting period for getting a FHA loan after a short sale is 3 years but can be as little as 1 year.

A Loan After A Short Sale: Conventional Loans

When most people think about getting a conventional loan, they think that there is a requirement to put at least 20% down.  While it is true that if you put 20% down with a conventional loan you can avoid paying mortgage insurance, it is not true that you are required to put 20% down in order to get a conventional loan.

There are a number of conventional loan programs that will allow you to buy a home with just 5% down by adding mortgage insurance on the loan and in some cases, it can be a better financial option than getting an FHA loan. With conventional loans, the waiting period for a loan after a short sale no longer depends on how much money you are planning putting down as a down payment.  Previously, if you put at least 20% down, it was 2 years.  Now, the waiting period is 4 years if you obtain a Fannie Mae insured conventional loan.

The waiting period for getting a Conventional  loan after a short sale can be as little as 1 year if you have 20% down and use a specialty lender.

A Loan After a Short Sale: VA Loans

VA loans are popular with anyone who is a Veteran and is eligible for a VA loan.  VA loans offer 100% financing and don’t require mortgage insurance.  Getting into a VA loan after a short sale is common and it is is one of the easier loan programs to qualify for.

The waiting period for getting a VA loan after a short sale is typically 2 years but can be shorter depending on the individual circumstance.

A Loan After a Short Sale: USDA Loans

USDA loans

The waiting period for getting a USDA loan after a short sale is 3 years.

A Loan After a Short Sale: Jumbo Loans

Generally speaking, jumbo loans are going to be the hardest loans to qualify for after a short sale.  If you are planning on getting a jumbo loan after a short sale, be prepared to wait the longest of any of the programs and put the most money down.

The waiting period for getting a jumbo loan after a short sale can be as long as 7 years.

A Loan After a Short Sale: More Questions?

Do you still have questions about qualifying for a loan after a short sale? Contact Us.