1-888-808-8062

Buying After Short Sale Waiting Period Extended

Short Sale Waiting Period Extended August 2014Effective August 16th 2014

Last week Fannie Mae announced a couple of really big changes to the waiting periods required to purchase a home after a financial hardship that resulted in either  Foreclosure, Short Sale or Deed in Lieu of Foreclosure.

I wrote about Fannie Mae Waiving the Waiting Period for Foreclosure Included in Bankruptcy, which was a completely unexpected addition to this latest update.

Unfortunately, the ability to use the Bankruptcy date instead of a subsequent foreclosure date, does not appear to include pre-foreclosure events such as Short Sale or Deed in Lieu of foreclosure.

This was a nice change in policy that seems to be opposite of the simultaneous news that Short Sale or Deed in Lieu waiting periods are being extended.

While we did have advance notice that Conventional waiting times were going to be increased, this recent update filled in some of the details and timeline for when everything goes into effect.

What Changed

For the past few years, Fannie Mae has treated pre-foreclosure events, Short Sale or Deed in Lieu of Foreclosure, differently than a foreclosure.

If you had a 20% down payment, and a minimum 680 credit score, you were able to buy in only 24 months from the completion date of the short sale or deed in lieu.  For any loan applications taken after August 16th, 2014 this option goes away.

This is really the only change that could be construed as having a negative effect on new home buyers trying to get back into the market after a pre-foreclosure event.

If you had less than a 20% down payment, you could purchase using conventional financing with only 10% down, 4 years after a short sale or foreclosure with a minimum 680 credit score.

What’s New

The reaction to the several changes announced by Fannie Mae on July 29th seems to be overwhelmingly discouraging.  I have a different take on it, I mean, yes it’s kind of a bummer that you can no longer put 20% down and buy in 24 months, but all of the other changes are actually a loosening of current guidelines.

If you’ve had a short sale or deed in lieu, the waiting period before you’re eligible to buy with conventional financing has been moved to 4 years.

However, the 4 year waiting period does not appear to come with the same loan to value and credit score restrictions as did the previous guideline.  If this is in fact true, that means that any homebuyer with a short sale or deed in lieu can buy in as little as 4 years with a minimum 620 credit score, and 5% down payment.

This change takes place for all applications taken after August 16th.  We might have to wait until August 16th, when Desktop Underwriter (DU) is updated, to see what limitations might be applied, if any.

Other Waiting Periods You Should Know

Conventional waiting periods after pre-foreclosure are still significantly better than the 7 year wait after a foreclosure that was not discharged through bankruptcy.

Here’s a quick overview of other Waiting Periods you should be aware of:

Buy After Bankruptcy 

  • FHA Financing – 2 years from discharge after Chapter 7 / 1 year after Chapter 13 discharge
  • Conventional Financing – 4 years from discharge ofr Chapter 7 / 2 years from discharge of Chapter 13
  • VA Financing – 2 years from discharge after Chapter 7 /  Chapter 13 payments made for minimum of 12 months

Buy After Foreclosure

  • FHA Financing – 3 years from date title transfers out of your name
  • Conventional Financing – 4 years from BK discharge if included / 7 years from title transfer if no BK
  • VA Financing – 2 years from title transfer out of your name

Buy After Short Sale or Deed in Lieu

  • FHA Financing – 3 years from date title transfers out of your name
  • Conventional Financing – 4 years from date title transfers out of your name
  • VA Financing – 2 years from title transfer out of your name

Working with a Creative Lender

As a direct lender in California, we pride ourselves in being on the cutting edge of creative financing solutions.  When I say “creative”, I mean that we know our guidelines, and we know how to fight through the hurdles of complicated situations that big bank employees have neither the experience or patience to figure out.

If you feel that you may be eligible to buy a home after bankruptcy, foreclosure, short sale or a deed in lieu of foreclosure and you’re not sure where to start, you can ask questions or leave comments below, shoot me an email directly, or give us a call anytime.

Our phone number go to our cell phones, and we are available when you have a question.  Don’t be afraid to leave a message, I promise we will get back to you in a timely manner.

562-999-1355

Scott Schang

Branch Manager at Broadview Mortgage Long Beach, California, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (562) 999-1355 or ScottS@broadviewmortgage.com

Get Notified of New Posts

Leave A Comment

2 comments
snoopy_san
snoopy_san

Hi Scott, I don't know if you can help me as I am in Las Vegas, NV.  I short sold my home in February 2012 and I was lucky and purchased my new home in April 2014.  I also have owned a rental home in MN since 2001.  I am coming into some money and was hoping to invest (30-50% down) in another rental property but I was just told by a local lender that now I have to wait the 4 year period.  I find this so hard to believe that there is not another option available given that I already own two properties.  When I short sold, it was due to a loss of a wage (which I understand could be an exception).  Aside from hard money, are there any other options?

ScottSchang
ScottSchang moderator

@snoopy_san I am not finding anything in the Fannie Mae seller guide that would indicate that extenuating circumstances are limited to the purchase of a primary residence.  

I would talk to another lender maybe and get a second opinion.  If you were able to qualify for a conventional loan in April 2014, I do not see any reason why you could not also qualify for the purchase of an investment property.

Unfortunately, I am unable to lend in NV, but if you shoot me an email (address in author profile above) I can refer you to someone I know and trust that does.

Hope this helps?

Follow

Get every new post delivered to your Inbox

Join other followers: