I have been on this site and just reading all the time and the information is very helpful. I hope someone can help me with my situation or some advice what would be the best. Here's our situation:
My husband lost his job and we eventually had to give our house back to the bank(Deed in Lieu). Put in on the market but unfortunately that wasn't happening and our saving was drying up fast. So the Deed in Lieu was the only thing left. He was able to get his job back with his company after 8 months but only with lower pay. So now we would like to purchase again and this time using (FHA) and a new construction as well.
We talked to the Builder's Mortgage broker and explained our situation. She said we can try a Fannie Mae(2 yr waiting period with/our circumstances). However I'm a little nervous because we have been working on our credit and I don't want anyone pulling our credit until we are ready. If we wait the 10 months it will be 3 yrs and we can go FHA. Our lease is coming up and we are thinking about what we need to do. Go ahead and just renew our lease and wait.
So my questions:
1. Should we try the Fannie Mae or just wait for FHA
2. If we wait from FHA can we get a pre qua to do a contact on a construction loan a few months earlier? it takes 8 - 10 months to build
I know I'm asking a lot but please any advice would be greatly appreciated.
Pull your credit yourself using MyFICO and supply it to the mortgage broker you are talking to for information purposes. Ask for an opinion based on that. At least that way, you won't have a hard pull.
Fannie Mae normally requires a 4-year waiting period on a deed-in-lieu, except when it was caused by extenuating circumstances, then only 2 years is required. Fannie Mae's guidelines explain extenuating circumstances as:
Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.
If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include
documents that confirm the event
such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.; and
documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event
such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.
The lender must obtain a written explanation from the borrower explaining the relevance of the documentation. The written explanation must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate that the borrower had no reasonable options other than to default on his or her financial obligations. The written explanation may be in the form of a letter from the borrower, an email from the borrower, or some other form of written documentation provided by the borrower.
Extenuating circumstances can be tough to get approved. If your credit was perfect up until your husband lost his job, you can document the layoff, and that you burned through your available checking/savings, then that all increases the chances of being able to get approved now vs. waiting a full 4 years.
If you decide to go with FHA, it's possible to get a pre-qual now for loan that would begin after the 3-year mark of the deed-in-lieu. So that could be your backup option.