Want to buy a home after a short sale?

For those that sold their homes with a short sale (selling for less than they owed), things are going to change soon.  Fannie Mae has allowed you to buy a home as soon as two years after a short sale as long as you put 20% down.  That is going to change this month – you are now going to have to wait at least four years to get a conventional loan.

Right now, Fannie Mae has allowed you to buy as long as you had 20% down at two years, then it went to 10% at 4 years.  They are changing that policy and making it 4 years for everyone but eliminating the down payment requirements.  If you have extenuating circumstances, you may be able to buy after two years, but that can be difficult to prove.

Freddie Mac allows you to buy after 4 years, so that won't help – they probably will not change this since it now matches Fannie Mae.

FHA does allow you to purchase after three years without any specific down payment requirements.  

What are extenuating circumstances?  Fannie Mae defines them as nonrecurring events that resulted in sudden/significant reductions in income, or a catastrophic increase in your financial obligations.  Some situations are major illness or death in the family  (such as a spouse), divorce is usually not an extenuating circumstance.  If you feel you may qualify for this, ask your loan officer and you may want them to check with an underwriter to verify if it will be considered an extenuating circumstance.

Most importantly, you will want to make sure your credit is good and there aren't any lates after the short sale -that will make a difference in whether or not an underwriter will approve your loan.

As with most things, time will heal short sales, foreclosures and bankruptcies – it's just a matter of how long you have to wait.

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, NMLS#150953 - Email - Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

Related Posts

Weekly real estate market update 2/3/23… coming soon listings jump to highest in 5 months

After months of hanging low, coming soon listings jumped to the highest they have been since the beginning of September… a good sign the real estate market is bouncing back...

How to lower your debt to income ratio….

When you apply for a mortgage, your lender will examine your overall financial health. They will obtain a credit report, ask for proof of income, and calculate your debt-to-income (DTI)...

Subscribe to Our Newsletter for Market Updates & Mid-Century Modern Listings

Our weekly HomesMSP Update includes current local market information and a curated list of mid-century modern properties for sale, plus posts from an inspector, a lender, a stager, info about neighborhoods, life in the Twin Cities… even recipes!
Hidden

Blog Categories

Archives

Sharon and John Hensrud

About Us

The HomesMSP Team is committed to meeting you where you are and listening… really listening to understand you so we can use our extensive knowledge of the market and local neighborhoods to give you personalized service.