Buy Again Sooner after Short Sale or Deed in Lieu of Foreclosure?

NOTE:  These guidelines were changed in August, 2014 – See new guidelines here

You can buy again sooner using Fannie Mae conventional home loan financing if you avoided foreclosure of a previous home through a short sale or deed in lieu of foreclosure.

Buy Again After Short Sale / Deed in Lieu of Foreclosure
TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment

FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

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There may be additional closing costs to offset the added risk of reducing the waiting period, and this may also vary from lender to lender.

Buy Again after Deed In Lieu Using A FHA Loan

How to buy again after a deed in lieu of foreclosure using an FHA loan

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The good news is that it’s POSSIBLE

Possible doesn’t mean it’s going to be easy.  One of the conditions of being able to buy again sooner  is that the short sale or deed in lieu of foreclosure is properly reported on your credit report.

This is important because Fannie Mae uses an automated underwriting system called DU or Desktop Underwriter.  Because this is an automated underwriting system, it will import your credit report and make a decision based only on what information is reported.

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If items are reported in error, it could cause a false decision – on the other side, if items are excluded from your credit report (like the fact that foreclosure was avoided) this will also result in a false decision.

Also, it is not uncommon for investors like Fannie Mae to “allow” loans with exceptions or unusual conditions such as this, and many times they allow it with additional costs or restrictions to lenders, which means that sometimes these types of loans are not widely available and therefore it’s difficult to get information about them.

Do you have 10% to 20% down payment?

If you’ve worked hard to re-establish your credit and saved up enough money for a down payment, this should be great news!  I would like to think that I do a pretty good job of staying on top of changes in the industry, but honestly, this one slipped by me for a couple of months.

If you think you may be eligible to buy again after short sale or deed in lieu of foreclosure and have a 10%-20% down payment, leave a comment below, drop me an email, phone call or chat live with a specialist here on the site.

Visit this article for more information about Buying Again after Bankruptcy, Short Sale or Foreclosure

64 comments
sidcarol
sidcarol

My situation is that my husband and I filed for DIU in Feb of 2011 but our reports are showing 120 days and the loan of the house was paid off on two reports and still showing on one report.  My husband and I are separated now and I'm trying to clean up my credit to possibly buy again this year.  My lowest credit score is 694 with Equifax, 734 with TransUnion and 739 with Experian.  It looks like the credit files have July as being the last day of the DIU.  How is this possible when we filed in February and the 120 days which would mean payments missed from Feb to May 2011.  I'm concerned because I need to be out of my apt in August of this year and do not want to rent again.  Way too expensive.  How can I purchase and what types of loans would I qualify for.  I also tried to get a preapproval to see where I stood credit wise and my JFCU turned me down because of the deed in lieu staing I have to wait 4 years.  They use Fannie Mae, which I read was ONLY 2 years waiting time?  Help, I need direction and clarity.

kmbrlycc
kmbrlycc

Hello Scott,

 

I had filed for bankruptcy in October of 2010 after a job loss in 2008. I was struggling but the house value dropped so low and my attorney advised filing for a BK, which I did.  My mortgage was included in the BK with a small second (home equity loan).  that was discharged in January 2011.  I have been in my home and still am.  I have not made a mortgage payment since. I finally got a full time permanent positon in 2012. It pays enough to meet my student loans and car payment but not enough to pay my mortgage and I had already appealed to my mtg company four times previous to working with me on a loan mod. they refused. Anyway, I checked my credit report and in the middle of 2012 it showed my mortgage loan as closed, but I continued to get statements monthly for my house payment and called each time I had to change my contact info to the mortgage company.  I finally have found a buyer for my house and they have submitted the offer. My question is, since my credit report shows my mtg loan closed and my bk discharged, when will I be able to think about buying a house?  Does the credit report get another knock with the shortsale if it goes through?  Am I off the hook for this mortgage if it goes through andmy name is taken off of the paperwork for good? I have no idea where I stand. Thanks for your anticipated answer. Hope I was clear enough for you to answer me

InLimboInSanDiego
InLimboInSanDiego

Great information here! Here's our situation. Clean short sale April 2010, but DU is reporting refer/caution and we don't know what needs to be fixed. Lender can't do a manual underwrite and can't really help much further. The credit reporting agency used is reporting an MOP 9 for both our first and second mortgage, and they're saying its coming from Experian. Equifax and Transunion is reporting a 5 (120 days late). From our research, Experian has their own definition of a 9, but the agency is just reading that 9 verbatim and not really caring about its true meaning. Is this 9 causing the "refer caution"? We also notice the Report Date is showing up as 5/11 with "OK" payments through 5/11, but close dates are all 4/10. No one is willing to fix the 9 and we're trying to get the payment status updated, but we're not sure what actually needs to be fixed. Are you familiar with our situation, or have any suggestions? Thanks!

Phil
Phil

Hi Scott, Great info. I have a question about our situation. We relocated for work and had to short sell our house. The transfer of ownership occurred in Oct. 2008. After the short sale was completed, Wells Fargo proceeded to sue us for a deficiency judgment, which forced us into chapter 7 bankruptcy. The chapter 7 was discharged in Nov. 2009. Based on the FHA guidelines, we have applied for a mortgage (FHA) and were pre-approved and sailing through until underwriting got a hold of it 3 weeks before closing. They are saying that the deficiency judgement filed after the short sale was completed counts the same as foreclosure proceedings, therefore we have to wait until 3 years after the bankruptcy was discharged. In reading the HUD guidelines, it clearly states that the waiting period of 3 years (for a short sale with late payments, which was the only way we could get them to consider the short sale!) begins the day deed is transferred to the new owner (Oct. 2008) and the waiting period of 2 years begins at the time of chapter 7 discharge (Nov. 2009) meaning we are currently eligible. Am I correct? We are without a place to live in 3 weeks if we cannot get this resolved. I think their underwriter is misinterpreting the HUD guidelines. Thanks for your help!

Lynne
Lynne

Hi Scott My husband lost his job and we were foreclosed on. We missed payments but sold our home before the sheriff's sale and Wells Fargo dropped the foreclosure suit. Our mortage was paid in full, but we settled our equity line (we brought money to closing and they forgave the rest). Is it still considered a short sale if only the equity line was short? We want to get an FHA loan and wonder if we have to wait the three years from date of sale of house 10/09? WE ONLY HAVE 3.5% down, but our only debt is a $487 car loan and husband has a new job paying 160K per year. He had a job paying 115K for the past three years, as well. Thanks for your help!

Albert
Albert

My wife and I completed a shortsale in the southbay in 12/09. We were able to get a preapproval and are now having trouble with the desktop underwriting. It seems Experian reports when our loan started the foreclosure process. Even though it also states that the loan is settled for less than the amount owed, its causing the desktop software to see it as a foreclosure. Have you seen anything like this before?

Anthony
Anthony

Hi Scott. First thank you for posting all of this information. I want to know if my wife and I will be able to buy a home soon. Background--My primary home sold via short sale in March of 2010. I had a second loan which I settled with the bank for less than owed. I paid cash. We also short sold a income property and it closed in May of 2010. I have re-established my credit. My scores are 695-768-701. I have the 10-20% down. May of 2010 was the finalization date for everything. Do you have any advise? I was just told by my bank, I would have to wait a minimum of four years! Additional info-- The primary loan was recorded as a deed in lieu and not a short sale. My credit shows FR or foreclosure redeemed.

Lora L.
Lora L.

Bankruptcy discharged 03/2010. Continued to make payments for a year. In the mean time the company I worked for was sold. The new employer was going to relocate us so I put my house up for short sale and received an offer. While wiating for the bank to approve my employer decided to close. I decided to continue with the short sale as it was now a hardship. I've since found a new job and would like to now by another home. Where does this leave me? Would I be eligible for a mortgage this year?

Gary
Gary

Thanks in advanced for any info Scott! My situation: --Short sold in Jan-2010. --No late payments. --My credit score is 730. --I have no debt and consistent income --I have 20% for a down payment. I've been getting conflicting information from various sources about when I can buy again. One mortgage broker has spoken with several originators and has pre-approved me for an FHA loan. Is this possible or a mistake? I'de rather get a conventional loan. I've been reading that Fannie Mae may allow for a loan after 2years and 20% down. Is this true and if so any suggestions on how to find a Fannie Mae lender willing to work with me.

Gary
Gary

Thanks in advanced for any info Scott! My situation: --Short sold in Jan-2010. --No late payments. --My credit score is 730. --I have no debt and consistent income --I have 20% for a down payment. I've been getting conflicting information from various sources about when I can buy again. One mortgage broker has spoken with several originators and has pre-approved me for an FHA loan. Is this possible or a mistake? I'de rather get a conventional loan. I've been reading that Fannie Mae may allow for a loan after 2years and 20% down. Is this true and if so any suggestions on how to find a Fannie Mae lender willing to work with me.

Hugo Ledesma
Hugo Ledesma

Hi Scott, I had a short sale February 2010 on a FHA loan and now looking to purchase a new home. I was told that I would have to wait 7 years before I can get another FHA loan again and that my only chance is to get a conventional loan with 20% down. The answers that I'm seen here do not reflect is they had FHA loans in the past. So my question is can I get a new FHA loan after 3 years if I defaulted on a previous FHA loan? Oh and I really like this site it is very helpful thank you for your time.

STEPHEN JACOBS
STEPHEN JACOBS

Lost my job after 36 yrs in 2005, had many lates on home in 2006, got caught up, fell again, etc and reached agreement on short sale with lender. Sold and settled on sale in 2008 Credit report shows lates to 180 days in 12/08. Also have three (30day) lates on an auto loan, last one in may 2010. Current income 100k last 3 yrs, debt of $10k, have 20% and was turned down for a conventional mortgage and told I can't go FHA because of the lates in 2010

Stephanie Vrbanic
Stephanie Vrbanic

Hello! My husband and I went through a short sale almost 3 years ago. May will be 3 years. However, we want to buy with a conventional loan and we have a good down payment. The house we want is only $49,000. Can we buy now?

Christine P
Christine P

Hi Scott, I have a question in regard to whether the guidelines are the same for co-borrowers. In other words, I short saled on my home back in January of 2009 due to a loss of employment. My husband had a home that he purchased before we were married and just short saled on it last year (due to loss of employment as well). We are both working now and make plenty of income, my question is would he be able to be a co-borrower on an FHA loan? I have the timing requirements met for FHA and have a mid 700 score. His score is in the mid to upper 600's, but he just short sold. Can he be on the mortgage or no? Thanks so much for your help!

Alan I
Alan I

My wife and I completed a short sale in 9/09. We were seeking a loan mod at first, but when the bank refused, we were told to default on our mortgage to start a short sale process. We ended up missing approx 4 months of payments. Before allowing the short sale to go through, we agreed to a 20000 note to make up for the missed payments and to cover closing costs on the sale of the residence. I know FHA loans require a 3 year wait before we can qualify for a new FHA loan if there were defaults on payments during the foreclosure process, but there is no wait period if you were current with your payments during the short sale proces. We would like to purchase a new home now with a FHA loan. Will we be eligible for a FHA loan now or do we need to wait until 9/12?

Holly
Holly

Hi Scott, Do you know why it is so important for there to be a 24 to 36 month waiting period to borrow again from a Deed in Lieu? Or why this "guideline" (or regulation) is in place? I'm interested in the reasoning behind it. It's so frustrating because most of the time the Banks are holding up the process and the homeowners canot do anything about it. It's completely out of our control but affecting our lives so much. Here's our situation: 9/2009 -- Ch 7 Bankruptcy Discharged Entire time trying to work with the bank to either short-sale, foreclose or DIL. We included the entire amount of the Mortage in the bankruptcy. So the last late payment reported is 9/2009 and the mortgage currently is indicated as "closed" on our report. 1/2012 - DIL completed Both credit scores at 680. And we have more then 20% to put down. What is our timeline?

MD
MD

Hi Scott, I must say that your website is very helpful and I appreciate all your helpful information. My husband and I did a short sale on our primary residence and we closed Aug 2010. The mortgage was under his name only and he is the only one working I am a stay at home mom. I had brain surgery in may 2010 around the time we decided to short sale our house. We looked into hard money loans and got approval with a 35% down, 9% 5 year interest rate with 2 pts. We live in southern california and we are in the process of looking into homeownership again. Is there a mortgage lending institution out there that can give us a regular loan other than hard money loan right now before our short sale waiting period expires? I am looking for a lower down payment requirement and if possible a 30 year fixed. We can put a down as much as 35% but trying to avoid it and just put a down of 20% or less for a $230k home. My husband has a credit score of 670 as of jan 2012 and we're only getting a loan under his name since my score is lower than his and I don't work. Thank you for any input you might have.

MD
MD

Hi Scott, I must say that your website is very helpful and I appreciate all your helpful information. My husband and I did a short sale on our primary residence and we closed Aug 2010. The mortgage was under his name only and he is the only one working I am a stay at home mom. I had brain surgery in may 2010 around the time we decided to short sale our house. We looked into hard money loans and got approval with a 35% down, 9% 5 year interest rate with 2 pts. We live in southern california and we are in the process of looking into homeownership again. Is there a mortgage lending institution out there that can give us a regular loan other than hard money loan right now before our short sale waiting period expires? I am looking for a lower down payment requirement and if possible a 30 year fixed. We can put a down as much as 35% but trying to avoid it and just put a down of 20% or less for a $230k home. My husband has a credit score of 670 as of jan 2012 and we're only getting a loan under his name since my score is lower than his and I don't work. Thank you for any input you might have.

PJ
PJ

I did a deed in lieu on a Marriott timeshare in August of 2010. We've recently moved for a new job and would like to buy another home. I'm having trouble getting pre-approved due to the deed in lieu. My credit score is 672. What are my best options for getting approved?

Jessamy
Jessamy

Hi Scott, I had a Chapter 7 bankruptcy discharged in May of 2010, and stopped making payments. My mortgage did not report any late payments to my credit. The house was going to go into foreclosure, but I ended up signing up for a short sale. The home is in the long process of being sold. My question is, would the 2 year waiting period to buy begin on the date of bankruptcy discharge, or on the date of the transfer of the deed?

Lisa
Lisa

Scott - My husband and I did a short sale in Nov 2009 after moving from VA to PA. Six months after moving, we purchased a low priced house in PA (Dec 2008) to get out of the in-laws house. We were paying two mortgages for about 10 months. Both were paid on time (checking account drafts) and our credit scores were close to 800. About 18 months after putting the VA house on the market and virtually no offers, we got an offer well below our pay-off. We negotiated to within $18k and our lender agreed to a short sale. Our credit scores dropped to the high 600's but are now around 730. I would like to move to a larger house in a better neighborhood as soon as possible. I noticed on my credit report that the lender didn't record what they called something like a 'partial payment settled for less than the full amount' until Jan 2010. What date will be the basis for the 3 year waiting period? When the short sale was completed in Nov 2009 or when the lender recorded it in Jan 2010?

Leanne
Leanne

Hi, I qualify for a home loan in regard to my credit score and down payment, debt to income ratio, etc. I was preapproved but the bank said in order to finalize everything I have to wait 3 years after the foreclosure from bankruptcy. The pre-approval was based on the fact that it's been over 2 years from the date of discharge. However, my problem is that the bank has just been sitting on the property and hasn't even attempted to sell it or put it on the market. We owed $220 and it appraised for $72 because of the market crash and local foreclosures. Is there not some loophole that would help me here since the bank isn't even trying to sell the property? Thank you!

Mr. Green
Mr. Green

Good Morning, Mr. Schang (Love the Site, Great Information!!) State of Reference: FLORIDA Date Chapter 7 BK filed to the County Court (5/2009) Last Date we occupied the Home (5/2009) Date Chapter 7 BK was discharged (12/2010) So Far 1 Year after Chapter 7 BK Date Chapter 7 BK reported to the Credit Report (12/2010) Date Foreclosure reported to the Credit Report (11/2011) Husband & Wife credit with all three credit bureau’s pass 700. Household annual Income $210k. My question is do we have to wait until the Bank sales the home to another borrower before the “Foreclosure” clock starts? We are looking to obtain an FHA loan in the future. We don’t think the foreclosed home will be sold in the next 2 or 4 years. It’s entirely too many foreclosures in the surrounding area. The foreclosed home has been on the county auction log for a couple of months now. No Buyers. Thanks for your assistance Mr. Schang!! Mr. Green!!

Mr. Green
Mr. Green

Good Morning, Mr. Schang (Love the Site, Great Information!!) State of Reference: FLORIDA Date Chapter 7 BK filed to the County Court (5/2009) Last Date we occupied the Home (5/2009) Date Chapter 7 BK was discharged (12/2010) So Far 1 Year after Chapter 7 BK Date Chapter 7 BK reported to the Credit Report (12/2010) Date Foreclosure reported to the Credit Report (11/2011) Husband & Wife credit with all three credit bureau’s pass 700. Household annual Income $210k. My question is do we have to wait until the Bank sales the home to another borrower before the “Foreclosure” clock starts? We are looking to obtain an FHA loan in the future. We don’t think the foreclosed home will be sold in the next 2 or 4 years. It’s entirely too many foreclosures in the surrounding area. The foreclosed home has been on the county auction log for a couple of months now. No Buyers. Thanks for your assistance Mr. Schang!! Mr. Green!!

Rebecca
Rebecca

My shortsale is 10 months old. My credit score is 670 and I have 20% for down payment on a house I am interested in. I have no debt and my debt ration is 28%. Could I qualify for a conventional or VA loan at this time, or do I still need to wait another 14 months?

Keith Holliday
Keith Holliday

I had a short sale in 2009 and 2010 both FHA loans. I now want to buy another property with a VA loan. Do I still have to wait two years from the last FHA short ales.

CM Borrego
CM Borrego

Scott, we are currently shortselling a house out of state. I was the only one on the mortgage. Would my husband be able to get a loan in California in his name after the short sale is complete? We're going to wait a bit anyway, but I'm curious whether he'd be able to do that and shorten our waiting period. His credit is 700+. He'd been out of work for an extended period of time, so we had to move to find him work (and he is working now). Thanks.

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