it seems that we are getting asked this question more and more. Short sellers want to know what their options are after their short sale is completed, and it seems as though the answer is sometimes convoluted by advice from friends, and erroneous myths. There are a few important things to udnerstand about the short sale process which directly affect someones ability to purchase a new home.
The first and most important thing to know is whether or not the seller was current at the time of the sale. If all payments on the previous mortgage were made on time, then the automatic preclusion for repurchase is waived. While this doesn't guaranty someone the ability to purchase immediately after a short sale, it sure does help the cause. In the event the seller had a few 30 day late pays, and then brought it current it will be up to the individual lenders to decide whether or not to make the loan. In the event the loan was not current at the time of the sale, chances are you will be waiting 2-3 years before purchasing using any type of government insured, or conventional financing.
The next factor that affects a short seller's ability to purchase a home is their specific hardship. This factor is often overlooked, and can change the scope of the entire deal. Many people think that the market dropping and them being underwater is their hardship, when in fact it is only a minor piece of it. A "qualifying hardship" is something that only an underwriter can truly determine. The most common are job transfers, death, illness etc. This is where many people fail to truly analyze a situation. I had some clients who were the victims of a violent crime in their home, and although they could financially afford the home their mental stress, and trauma made it impossible for them to continue to reside there. Using a common sense approach and some well though out letters of explanation we were able to sell their current residence short and immediately help them purchase a new home in a nearby neighborhood, using an FHA loan. These are the types of scenarios, where we as agents must have our eyes open!
The most commonly overlooked factor is geographic location. Most underwriters stand by the FHA guideline's rule of the new residence being outside of the immediate geographic area of the home which was sold short. This doesn't automatically preclude someone from purchasing within the same area, it must be exceedingly clear that they are not doing this to "take advantage of market conditions." you can see in the FHA Rule for selling after short sales, it is quite clear about this part.
There are always other caveats to these types of transactions, and it's imperative that we as agents stay up to date on the latest rules and regs, pertaining to our current market conditions. Also, working with a lender who truly understands these transactions is imperative, if you are in Arizona Casa Financial has proved to be very knowledgeable in this area.
See our website for more information on this topic specifically.
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