Before we get into a 2017 Mortgage After Short Sale, we first have to see how we got to a Short Sale to begin with and then figure out exactly what a Short Sale is. If you were a home owner during the Great Recession from 2007 to 2011 you were probably greeted with an exponential growth of your home’s value followed by the subsequent fall and crash of your home’s value. You are not alone as it affected nearly every home owner in the country as they saw their precious equity ripped away as foreclosures and short sales decreased home values at an alarming rate. Finally, a decade after the Great Recession started has the average home price surpassed what the average home price was pre-crash. It was like you were riding a roller coaster as you saw your home’s value go from an all-time high, to an all-time low in just a few years. There were even investors who gambled on purchasing homes too soon who thought homes had hit their lowest values only to see them keep falling for the next few years.
Now most of you probably know what a foreclosure is, so we won’t spend time talking on that as this is when the bank takes your home back through a sheriff’s sale since you stopped paying your mortgage and sells the home through auction or other means. If you don’t know if you went through a Short Sale, we should go through exactly what a Short Sale is so you can determine for yourself if you did or not. In its basic form, a Short Sale is the approved sale of a home where the proceeds from the sale aren’t enough t cover what is owed on the property. In these situations, you work out a deal with the lending institutions for your debt to be satisfied without clearing the entire amount owed. As long as the bank approves this deal this was a way for borrowers to get out from under their mortgage all the while doing less damage to their credit score. Foreclosures hit your credit score a lot harder, so if you are able to negotiate with the bank to take less than what is owed, this can benefit for you tremendously.
When looking at a 2017 Mortgage After Short Sale you need to make sure that you are aware of the mandatory waiting periods that are put on borrowers just like other derogatory items in your credit history. As is the case with Short Sales, Foreclosures, Chapter 7 Bankruptcy, and Chapter 13 Bankruptcy, there is going to need to be a “cooling off” period from when the derogatory action took place and in this time it should be shown that borrowers are financially responsible, have learned from mistakes, and have not fallen into the same situations that got them in trouble in the first place. In most loan programs guidelines, you are definitely going to need to wait at least a couple of years before you will be allowed to borrow again.
– FHA Loan: 3 years
– Conventional Loan: 4 years
– Non-QM Loan: Immediately (under certain circumstances)
One of the most common ways to get a 2017 Mortgage After Short Sale is to get an FHA Loan. As you probably know, FHA Guidelines are some of the most lenient in the mortgage business and when dealing with mortgages after a Short Sale, this is also the case as well. As you can see above, there is a 3 year waiting period for a mortgage after a Short Sale and the clock starts on the waiting period when the Short Sale date is recorded or when a prior FHA Loan claim was paid due to the Short Sale. Even after a Short Sale, you will be held to the standard FHA Loan Guidelines. These guidelines will require a minimum FICO score of 580 to receive a loan with 3.5% down payment. In terms of debt-to-income ratio, you will need a 620+ FICO and you will have a 56.9% DTI ratio. If you have a 580-619 FICO, you will be forced to adhere to a 43% DTI ratio. As you can see, getting your FICO score over 620 is vital in lessening the guidelines as much as possible. There could also be exceptions to the waiting period and this is only if you have experienced extenuating circumstances. Now what are extenuating circumstances you might be asking, well these are events that caused financial strain on you which include: losing your job, getting divorced, or a serious illness of the primary wage earner. In all cases, the primary wage earner needs to be affected and only then can it be possible to get extenuating circumstances approved.
There is also an opportunity for you to obtain a 2017 Mortgage After Short Sale through a Conventional Loan which is a loan that follows the guidelines of Fannie Mae and Freddie Mac. In most cases the required waiting period is 4 years, but with Conventional Loans, you may run into lender overlays that will require you to have a minimum down payment or credit score in order to get your loan done after 4 years. If you run into lender overlays then you need to reach out to me ASAP as we don’t have lender overlays and we can lend to the minimum guidelines in most cases that should arise. As with FHA Loans, you will still need to abide by the minimum qualification guidelines set forth by Fannie Mae and Freddie Mac in order to obtain a mortgage and that requires a minimum of 620 FICO, however you may be required to be at least at 640 or even 660 to be considered for a loan at some lenders. You will also be required to have a 45% debt-to-income ratio no matter what.
One of the alternative ways to get a 2017 Mortgage After Short Sale is to go down the Non-QM Loan route and what this means is you may be able to qualify for a mortgage the day after your Short Sale, but there is going to be a price to pay in order to get one of these loans. In most cases, you are going to be forced to have a mortgage rate that is going to be substantially higher than if you waited for a standard loan. You will also be required to make a large down payment in the 10-20% range. If you really want that 2017 Mortgage After Short Sale you could be forced into a 10% loan and 20%+ down payment. Now if you have the means to do this then I guess this could be an option for you, however in most cases it is better for you to wait it out and get yourself into a more standard loan.
If you have been met with a last minute loan denial or aren’t sure if you can purchase a home after a Short Sale, then you are in the right place! We have the ability to make loans happen by offering products that lend to minimum program guidelines. If you believe you have the guidelines met and a lender still won’t work with you, you need to reach out today and get your process started ASAP. We are here to help every day, night, weekend, and holiday at 888-900-1020. If you should have any questions we are here to be a resource for you!