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New Member
VegasShortSale
Posts: 5
Registered: ‎12-29-2011

Can we qualify for home purchase after a short sale.

Living in Las Vegas, we fell victim to the recent housing crash.  Our dream home that we had built in 2005 had lost more than 50% of its value.  We decided that instead of continuing to pay for a $450,000 mortgage (on a home that was now worth about $200,000) that it would be best to Short Sell the house since there wasn't a program offered in all the Stimulus and Bailouts that really addressed our issues with the dramatic loss in home value.

 

We hoped that home values would stay low for long enough that our credit could rebound and lenders would be willing to give us a mortgage.  Its been over 2 years and although prices are rising, they are still way, way below where they were .  Rates are still very low and lendors seem to have loosened up a bit. 

 

I'd like some input from anyone who is knowledgable if enough time has passed for us to qualify for a mortgage  I've followed the format from above to identify our current situation and would appreciate any and all comments.

 

Thanks in advance!.

 

 

  • Credit.  Scores are via Identy Monitor and Identity Guard. All 3 between 705 and 715 while my spouse's scores are about 5 points lower across the board.  My spouse gets an actual FICO score from Discover monthly and it is about 15 points higher than what Identity guard reports.  Negatives are from a Short Sale that was completed October of 2011. Mortgage and 2nd on the house that we short sold are reported as negative accounts with nothing owed and reported as "paid and settled for less than balance", or something to that effect. Both accounts show as having been more than 120 days late. Again this was in 10/11.  Other than the short sale, there are never any lates on any accounts.  Accounts include about a dozen cr.cards with $100,000 in available credit and utilizing aproximately 5% each month that gets paid off each month.  There are several Installment accounts from various auto purchases over the years.
  • Income.  GROSS Income is around $100,000/year.
  • Source of income.  Income is from employment.
  • Monthly debt payments.  Only debt is for an Auto Loan opened about 3 months ago and is < $600/month.  I don't know the exact as I pay $600 and balance is about $30,000 at 1.9%
  • Employment One income is self employed and gets salary from company.  4 years as part owner and 15 years in industry.  The other income is Hourly + Reported Tips.  8 yrs with current employer and 20 years in the industry.
  • Assets/Reserves.  Aproximately $200,000 in retirement accounts.  Half in a 401K through employer and the other half in an ESOP account that will begin dispursement next year for 5 years at about 20%/year.  Checking and Savings.  Some other Stocks and Bonds.  Hoping to limit the down payment to about $25,000 not including any closing costs.  
  • Location.  Clark County in Las Vegas, NV.  Taxes are about 1% and Insurance 1/2%.
  • Property.  Is it a single family home as primary residence.
  • Value.  $225,000 to $250,000
  • Occupancy.  Primary residence
  • Transaction Type.  It is a purchase.
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Senior Contributor
StartingOver10
Posts: 3,833
Registered: ‎03-06-2010

Re: Can we qualify for home purchase after a short sale.

[ Edited ]

Based on your post your short sale was completed Oct 2011 which is more than 2 years ago.

 

If you have 20%+ to put down, then you are eligible for a new conventional Fannie Mae loan two years from the date the deed transferred from you to the new buyer. If you put down 10% than the waiting period is 4 years for a conventional Fannie Mae loan and for less than 10% the wait period is 7 years.

 

For a Freddie Mac loan, the wait period is 4 years. Both Fannnie and Freddie are conventional, but have different wait periods so ask your LO specifically.

 

FHA is 3 years except for the Back to Work program. It appears that you don't qualify (at first glance) for the Back to Work program, but speak to a LO to verify.

 

Naturally you will have to supply your HUD1 from closing and a letter of explaination for the short sale that shows a hardship event other than the loss of equity in the prior purchase.

Valued Contributor
ezdriver
Posts: 1,500
Registered: ‎08-24-2013

Re: Can we qualify for home purchase after a short sale.


StartingOver10 wrote:

Based on your post your short sale was completed Oct 2011 which is more than 2 years ago.

 

If you have 20%+ to put down, then you are eligible for a new conventional Fannie Mae loan two years from the date the deed transferred from you to the new buyer. If you put down 10% than the waiting period is 4 years for a conventional Fannie Mae loan and for less than 10% the wait period is 7 years.

 

For a Freddie Mac loan, the wait period is 4 years. Both Fannnie and Freddie are conventional, but have different wait periods so ask your LO specifically.

 

FHA is 3 years except for the Back to Work program. It appears that you don't qualify (at first glance) for the Back to Work program, but speak to a LO to verify.

 

Naturally you will have to supply your HUD1 from closing and a letter of explaination for the short sale that shows a hardship event other than the loss of equity in the prior purchase.


Very nice and complete summary. Well done.



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Valued Contributor
BrianB_The_Loan_Professor
Posts: 1,381
Registered: ‎07-29-2008

Re: Can we qualify for home purchase after a short sale.

Were you behind on payments at the time of the short sale - I know many banks required this to work with sellers

if not you may have an option for FHA now

 

Brian

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Brian B The Loan Professor
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New Member
VegasShortSale
Posts: 5
Registered: ‎12-29-2011

Re: Can we qualify for home purchase after a short sale.

StartingOver,

 

Thank you for your thorough response.  I was not aware of the rigid time periods that are set due to a Short Sale.  It seems like Fannie also imposes more rules based on the down payment amount.  Interesting.  Are these wait periods set as Black and White with no Grey area or is there some Grey depending on individual circumstances.   Do you think that the average LO is going to be up to date and aware of these restrictions? 

 

Thanks again for your response!

Super Contributor
ShanetheMortgageMan
Posts: 7,865
Registered: ‎09-28-2007

Re: Can we qualify for home purchase after a short sale.

Black & white, zero exceptions... not even a 1 day grace period.  There is a newer loan program here in California for people 1 day out of a foreclosure/BK/short sale which allows them to purchase with at least a 20% down payment, but that down payment is required.  Since these guidelines have been around for awhile, most loan officers will be aware of them. 

 

What Brian was mentioning is if you were current at the time of the short sale, and all payments were made on time within the 12 months of the short sale, then you could actually purchase 1 day after you did the short sale with FHA financing.  But you mentioned you were in default at the time of the short sale (120 day late payments), so that wouldn't be an option unfortunately.

 

If your credit would allow you to qualify today then you wouldn't have any issues with the sales price you are trying to qualify for in terms of the debt to income ratio, but to qualify today you'd have to put down $45-50k (20% down) on the sale price range you listed.  If you think the values in Las Vegas will continue to increase over the next year, you may want to consider putting down 20% today vs. being able to just do 10% down later this year with FHA financing (because if values keep increasing then that 10% later on may be closer to 12-14% right now).  Plus with your credit scores conventional financing would offer a better monthly payment than FHA financing anyway, due to FHA's high annual MI costs.  Definitely should speak to a loan officers so you can see how the numbers work out, if just to develop a plan you'll later implement.

New Member
VegasShortSale
Posts: 5
Registered: ‎12-29-2011

Re: Can we qualify for home purchase after a short sale.

Shane,

 

Thank you for the follow up response reguarding the guidelines and time restrictions on obtaining a mortgage after a short sale.  I had not been aware of them and is exactly why I came to this forum to ask the question.  I knew if anybody would know, it would be those great folks at myFico forums.

 

In reading the original response, it appears that we would be able to qualify right now for a Fannie Mae provided we had 20% to put down.  That may be our best option for a number of reasons, some of which you mention regarding rising home values and the likleyhood that rates will rise as well.  Not having to pay PMI has an impact as well.

 

Thanks again to all that post and offer answers to all the questions people post.  You help more than just the original poster in most cases.  For our situation you all were able to answer my questions with crystal clarity.

 

Thanks all! 

 

 

Super Contributor
ShanetheMortgageMan
Posts: 7,865
Registered: ‎09-28-2007

Re: Can we qualify for home purchase after a short sale.

Correct, you'd be eligible for 20% down using Fannie Mae financing right now.  You are welcome & good luck!


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