Waiting period to buy again after short sale

There is much “mis” information regarding the length of time former homeowners are required to wait between the date of their previous foreclosure / short sale and the time they want to purchase their next home.

Wait periods can be as short as two years or as long as seven years. What contributes to the confusion….are the additional “overlays” (additional underwriting criteria) for each specific investor.

Criteria are different for “conventional” loans vs. FHA/VA loans. For both types…..what determines the “wait time” is the new buyer’s (i.e. former “short seller”) circumstances at the time of the sale. Specifically….what were the “extenuating circumstances” that can be clearly documented?  The “burden of proof” will clearly be on the BUYER and there is USUALLY more than just ONE circumstance.

Examples of extenuating circumstances are:

1) Job loss job in a specialized field, and what caused the extended period of time to find a new job.

2) Significant health issues for borrower or close family member.

3) Death /illness of close family member PARTICULARLY if the victim is a signatory on the loan. (must provide medical records and/ or death certificate).

Strategic Defaults

Buyers are NOT eligible for a new FHA- INSURED MORTGAGE ….if they pursued a short sale agreement on their principal residence simply to:

1) Take advantage of declining market conditions   AND
2) Purchased at a reduced price…a similar or superior property…within a reasonable commuting distance.

In other words if your buyer engaged in a “strategic default”…they can kiss of any FHA financing for the foreseeable future.

Buyers seeking “conventional financing” who previously “strategically defaulted” currently have up to a 7-year wait period before they are eligible for financing.

Specific wait time criteria that can be viewed here:

Fanny/Freddie wait times for former short sellers: http://filelibrary.myaasite.com/crm-snap/2/2599/441400.pdf

FHA wait times for former short sellers: http://filelibrary.myaasite.com/crm-snap/2/2599/441401.pdf 

This information was provided by Daniel Dobbs, American Commerce Mortgage in Yorba Linda.  Dandobbs6@gmail.com

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