Short Sale waiting Period Rules

[njmb]

My wife completed a short sale 3/2012.  I have heard differing answers as to the waiting period one must wait until they can obtain a mortgage after a short sale.  If anyone knows the time frames for each different type of loan (FHA, Conventional, etc...) and the FICO score needed for each, please post.  Thank you.

[ShanetheMortgageMan]

VA has no published rules for short sales, however the Cleveland Regional Loan Center (RLC) has said if the mortgage was current for the 12 months prior to the short sale & there is no deficiency balance remaining then a new VA mortgage is acceptable 1 day after the short sale.  If those two requirements cannot be met, then it's considered the same as a foreclosure and a 2-year waiting period is required (1 year may be acceptable if there are extenuating circumstances surrounding the short sale).  VA has no required credit score, but most lenders are looking for a 620 score.

FHA says you are not eligible for an FHA mortgage if the short sale was to take advantage of declining market conditions (i.e. a strategic default) and you would be purchasing a similar or superior home within a reasonable commuting distance at a reduced price, so if that is someone's situation they do not have a timeline on when they can obtain a new FHA mortgage - you just can't.  Technically you'd have to buy in a different area, buy a superior or similar property at a higher price, or would have to be buying an inferior property.  A borrower is eligible for a new FHA mortgage immediately if the mortgage payments on the prior mortgage were made within the month due for the 12-month period preceding the short sale & installment debt payments for the same time period were also made within the month due.  A borrower who is in default on their mortgage at the time of the short sale is not eligible for a new FHA-insured mortgage for 3 years from the date of the short sale, however a lender can make an exception if default was due to circumstances beyond the borrower’s control, such as death of primary wage earner or long-term uninsured illness, and a review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default.  FHA requires a 500 score (580 if you want to put down less than 10%) and most lenders are requiring a 620 or 640 score, but lately I've noticed several lenders starting to go down to a 580 or 600.

USDA considers a short sale the same as a written off debt, so no less than 3 years, unless the situation was beyond the borrower's control/was extenuating circumstances, then less than 3 years can be acceptable (each situation is case by case, comes down to USDA's review).  USDA doesn't have a minimum score, but typically will not approve scores less than 580 and prefers scores to be at least at the 620 or 640 level.

Conventional requires 2 years and then a 20% down payment is needed (10% down if the short sale was due to extenuating circumstances), 4 years and then just 10% down is needed, and then at the 7 year mark you can put the minimum down (currently 3%, but soon going to 5%).  It doesn't matter if you were in default at the time of the short sale or not.  Conventional requires a 620 score.