If I did a Santa Cruz County Short Sale what is the wait time to buy the next home?

Hyko, Thank you for your comment. It set me on a fact finding mission this morning.

This was my understanding: If the Seller was current when he did the short sale they "may" get the option of buying again in 2 years. I have closed more than 23 Short Sales were I did the negotiating and the majority of Sellers doing a Short Sale were not current when they were approved for a short sale. I advise Sellers to stay current but not everyone can do that.  This means that the majority will have to wait a minimum of 3 years.

These things change all the time; so, I called HUD and asked "Can a seller buy again in less than two years?"

Answer from HUD counselor: "Mmmm, sorta . . . Not really, Fannie Mae guidelines now require 24 months "seasoning". FHA adopted guidelines in 2010 that say a seller who is current on their mortgage and does a short sale "may" qualify to immediately buy another home. But unfortunately that is going to be the exception rather than the rule."

"Fannie Mae guidelines allow a seller to immediately apply for a new loan to buy another home if that seller kept the payments current, had no delinquencies exceeding 30 days and did not agree to repay the debt relief. Moreover, it's the late payments that dramatically affect your credit report, not the short sale."

But hold on there Partner! Lenders aren't so quick to follow those guidelines. After careful research this morning and confirming with my two trusted FHA mortgage advisers over at Prospect Mortgage & HomePath today, I was told that while Fannie and FHA have great guidelines the actual investors who buy the loans from Banks in order for them to continue lending are not having it.  Their guidelines are very strict.  Of course there are exceptions to every rule, but be prepared for the NO!  Special circumstances are considered in cases of death of a spouse, and job loss, pretty much the things that are out of your control or catastrophic in nature.

Ah  But Wait...There's more!  And the fun just keeps on coming.  I was also informed today that even though HUD made recent changes . . .  they are reevaluated again in March.

I looked up the last announcement from Fannie Mae which states:

"To support overall market stability and reinforce the importance of borrowers working with their servicers when they have difficulty repaying their debt, Fannie Mae is updating several policies regarding the future eligibility of borrowers to obtain a new mortgage loan after experiencing a preforeclosure event (preforeclosure sale, short sale, or deed-in-lieu of foreclosure). The "waiting period" - the amount of time that must elapse after the preforeclosure event - is changing and may be dependent on the LTV ratio for the transaction and whether extenuating circumstances contributed to the borrower's financial hardship (for example, loss of employment)."

In addition, here are the new specific charts below. They show that, while it is possible to get a new Fannie Mae conventional loan 2 years after a foreclosure, you will need a 20% down payment under normal circumstances of a short sale or a 10% down payment under extenuating circumstances (job loss, etc).

Of course, in addition the borrower must have re-built their credit after the short sale and shown a general good credit history. These new standards go into effect July 1st, 2010 and could serve to help borrowers who experience a difficult situation with the short sale of home to be able to purchase a new home sooner.

Preforeclosure Event Current Waiting Period Requirements New Waiting Period Requirements (1)
Deed-in-Lieu of Foreclosure 4 years
Additional requirements apply after 4 years up to 7 years
2 years - 80% maximum LTV ratios
4 years - 90% maximum LTV ratios
7 years - LTV ratios per the Eligibility Matrix

Preforeclosure Sale 2 years
Short Sale No policy currently exists specific to short sales
Exceptions to Waiting Period for Extenuating Circumstances
Preforeclosure Event Current Waiting Period Requirements New Waiting Period Requirements (1)
Deed-in-Lieu of Foreclosure 2 years
Additional requirements apply after 2 years up to 7 years 2 years - 90% maximum LTV ratios
Preforeclosure Sale No exceptions are permitted to the 2-year waiting period
Short Sale No policy currently exists specific to short sales