Can I Buy a Home Immediately After a Short Sale?

By
Mortgage and Lending with Fairway Independent Mortgage NMLS #196099
https://activerain.com/droplet/9Lm

Can I buy a home immediately after a short sale? The answer is yes.

  The other day I received a call with this exact question from a Woodbridge, VA short seller. I answered, "Yes you can with FHA, if you meet the following qualifications":

  • Home short sold cannot be a FHA loan
  • Must have been current on mortgage at time of sale
  • Sold home must not require deficiency payment for the difference
  • 620 minimum credit score
  • 3.5% down payment
  • Short sale caused by extenuating circumstances and not just a person trying to take advantage of the market (by selling short and buying same type home at half the price)
FHA requirements
The last requirement of extenuating circumstances is where it gets cloudy. An extenuating circumstance, according to FHA is one of the following:
  • Job loss or loss of income
  • Sickness or illness of the borrower
  • Death of a wage earner
  • Circumstances beyond your control
Click here to read the mortgagee letter from HUD about purchasing after a short sale.

If you don't meet the above criteria; here are the time frames you have to wait before purchasing again:

-Fannie Mae Conventional 2 years with 20 percent down payment
-FHA- 3 years from time of sale

As we continue to be in this market of short sales and foreclosures look for more lending guidance to come with hopefully shorter time frames. Buyers should not be punished or kept out of the market for situations beyond their control.
    
Need an FHA loan in Woodbridge, Va,   have a question, or did the post tickle your curiosity... now feel comfortable giving me a call (703-497-3936), or shoot me an email (I have Blackberry).
markita@weststarmortgage.com



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Re-Blogged 13 times:

Re-Blogged By Re-Blogged At
  1. Ralph Gorgoglione 06/16/2010 04:38 AM
  2. Lanre-"THE REAL ESTATE FARMER" Folayan 06/16/2010 06:06 AM
  3. Michael Collins 06/16/2010 07:14 AM
  4. D B 06/16/2010 08:21 AM
  5. Daniel J. Hunter 06/16/2010 12:52 PM
  6. Michael Ford 06/16/2010 03:19 PM
  7. Jim McCormack 06/17/2010 03:34 AM
  8. Tamara Dorris 06/17/2010 03:43 AM
  9. Joetta Fort 06/17/2010 04:46 AM
  10. Joan Lorberbaum Moore 06/17/2010 05:18 AM
  11. Gene Riemenschneider 06/17/2010 07:49 AM
  12. Joanne Gillet &The Edge Of The Beach Team ---- Pawleys Island, SC 06/20/2010 03:30 AM
  13. Brenda Carus 06/21/2010 07:01 AM
  14. Erick Blackwelder 06/23/2010 09:19 AM
Topic:
Lending / Financial
Location:
Virginia Prince William County
Tags:
woodbridge short sale
buy a home after short sale
woodbridge lenders
home after foreclosure

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Anonymous
Terry Renshaw

I think Eric Newman is right on...most lenders (investors) will have overlays that out weigh FHA...There is not much risk taking going on...If you know of a lender that is making these loans, could you let me know who?

Jun 17, 2010 05:20 AM #51
Rainer
90,027
Wade Kawahara
Dominion Real Estate Partners, LLC - Phoenix, AZ
Thanks for the information. I wasn't aware that a buyer could do that!
Jun 17, 2010 05:37 AM #52
Rainmaker
1,431,110
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Good post.  I had a prospect asking me about this the other day.

Jun 17, 2010 07:49 AM #53
Rainmaker
92,266
Brad Yzermans
First Time Home Buyer & Down Payment Assistance Specialist in So Cal. - Temecula, CA
Temecula-Murrieta-Menifee FHA/VA Mortgage Lender

Here's how I read it.....feel free to correct me if I am wrong. Here is the mortagee letter everyone needs to read http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf

It states NO ONE can purchase using an FHA loan for three years if they did a short sale to take advantage of the market (buy similar/larger home then they have now that results in owing less).  In this market it's imposible not to take advantage of the market.....homes cost less now and no way of getting around that.  The only time they can purchase after short selling is if they are moving for work/job transfer......and would cause an unreasonable commute from their current home.....probably needs to be more than 75-100+ miles each way.  Plus, the lender has to report on credit that the short sale serves in payment in full. 

And they cannot have been late on any installment debt liabilities...not just your mortgage.

Job loss is not an extenuating circumstance.....only death of a primary wage earner or long term un-insured illness.

Jun 17, 2010 07:55 AM #54
Rainmaker
144,599
Markita Woods NMLS#196099
Fairway Independent Mortgage - Woodbridge, VA
Queen of Mortgages - FHA, VA, Conventional, USDA

Hey Brad thanks for your interpretation. I am actually going to add the mortagee letter to the blog post. I will first say every real estate market  and situation is different. You indeed could short sale in this area and not take advantage of the market by purchasing a different type of property or a property with a lesser payment that now meets the financial position of your situation. I definitely could see how that would be a challenge in beautiful California and the homes there....

Lastly as far as job loss, it is an extenuating circumstance with Weststar and our investors interpretation of the FHA guidelines, when the circumstance is properly documented and outside of the buyers control. It is definitely a gray area as some investor overlays and lenders will not allow. At our our company, we have common sense underwriting and typically do fund the loans that are little outside the box.

So let's not take the post out of context, nine out of ten short sellers are not going to meet the aove criteria but for the one family/buyer that does I am glad we have an outlet with FHA.

Thanks for stopping by....

Jun 17, 2010 08:26 AM #55
Rainmaker
442,843
Mark R. Westpfahl e-PRO® (CNE)
Vexillum Realty - St. Paul , Minneapolis and suburbs - Eagan, MN
e-PRO® CNE® REALTOR® Minnesota Real Estate Broker

Interesting.  I hate to see so many sellers damage their credit when times get tough. It would be nice to get these sellers right back into a house & be current on a loan.

Jun 17, 2010 10:12 AM #56
Rainer
357,087
Randy Dodd
Rosanna's Realty - Abilene, TX
ePro, GRI, TAHS

Cool info. A lot of people caught up in that mess. Good to know we may be able to help.

Jun 17, 2010 10:19 AM #57
Rainer
357,087
Randy Dodd
Rosanna's Realty - Abilene, TX
ePro, GRI, TAHS

Cool info. A lot of people caught up in that mess. Good to know we may be able to help.

Jun 17, 2010 10:19 AM #58
Rainmaker
188,973
Jeanna Martinez
RE/MAX Access - Schertz, TX

Markita - Thank you for sharing!  I was not aware that buying so soon after a short sale would even be a possibility! 

Jun 17, 2010 11:13 AM #59
Rainer
47,794
Monika Phillips
Keller Williams Realty Palm Beaches - Palm Beach Gardens, FL
PA

What a great post. I wish i saw that post earlier.

I had someone calling and asking if he can stop payment on his house... so he can safe money and buy cheaper house in the same neighborhood.

It didn't sound good. My best bet was to refer him to real estate attorney.

Jun 17, 2010 04:58 PM #60
Rainmaker
365,129
Joanne Gillet &The Edge Of The Beach Team ---- Pawleys Island, SC
Pawleys Seaside Realty - Pawleys Island, SC
We advise- You Decide! No Hassles...

Interesting and helpful. I will re post this blog and maybe send it to my short sale clients.. to give them hope.

Most people I am dealing with have a true hardship. But this means they are behind on the mortagage

and I thought that is the only way a bank would consider a short sale anyway? How does this fit?

Jun 20, 2010 03:29 AM #61
Rainmaker
326,392
Malik Crichlow
GoodBuy Homes NJ Essex & Union County Real Estate specialist - Maplewood, NJ
Maplewood,SouthOrange,Union Real estate

Great post, their is life after a short sale, people need to really understand this and choose that option over a foreclosure.

Jun 20, 2010 06:11 AM #62
Anonymous
Trevor M

Short sales just may be getting easier. There is a new bill introduced in the U.S. Congress that would impose a deadline on lenders to respond to short sale requests within 45 days. If you know anything about short sales, the banks can drag the process on for months.

Many times buyers just give up because it takes too long for the banks to respond, but (H.R. 6133), sponsored by Reps. Robert Andrews (D-New Jersey) and Tom Rooney (R-Florida), the short sale process just may get easier.

Congressman Rooney says, "I have heard from many short sellers in Florida whose potential homebuyers have walked away because they couldn't get a ‘yes' or ‘no' from their lenders. This bill would spur growth in the housing market by helping sellers and buyers complete short sales quickly."

I believe it will not only speed up a yes or no response from the bank, but I think the banks will lean towards accepting more home short sale offers.

Oct 11, 2010 10:04 AM #74
Anonymous
N Peters

Hello,

Could you please clarify --

One of your posters stated:

Thanks for helping to educate people that it IS possible to do this. From a practical perspective, it might be hard to get a short-sale accepted without being late but the important fact was it needed to be current AT THE TIME OF SELLING. A late may have been in place early on in the approval process which the seller could cure during the long short-sale disposition process. And voila, it's current at time of sale.

According to the verbage contained in the FHA doc, though, it appears that comment does not apply b/c in order to default on a payment you cannot make payment w/in the month the payment was due -- so even if you did a lump sum payment before closing to get mortgage current, I don't believe you'd qualify.

From the FHA document: "All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale,"

 

Nov 12, 2010 11:45 PM #75
Rainer
147,238
Arlene Garcia Hanner
SoCalAgency.com / Arlene Garcia Hanner, Broker - Downey, CA
SoCalAgency.com

To N. Peters,

Did you read page 5 of the Morgagee Letter, under the heading Exceptions, it says....Lenders may make exceptions to this rule for borrowers in default on their mortgage at the time of the short sale if:

...default was due to circumstances beyond the borrower control...

...review of the credit report indicates satisfactory credit prior to the circumstances beyond borrower control that caused the default....

Nov 13, 2010 06:48 PM #76
Anonymous
Frances

Hello to everyone.

May I ask this question to everyone who has had experience in short sales?

My husband and I brought a house in Gilbert AZ (beautiful town) in 2007. At that time, we needed a place to stay while I was doing my residency training which lasted for 3 years. We knew we wanted to move back to Northern California after my training, and knew we were going to sell the house after 3 years, hopefully with equity or at least to break even. However, the opposite happened. Just like everyone who is hoping for equity, ours is now a loss, and will continue to lose if the economy and housing market does not recover - a loss that is too much for our current financial situation.

My training is now finished, and I have several job offers in Northern California hence, we are very likely to move back. We do not want to rent our house, and would rather sell it while it is still looking new, and short-selling is what we are thinking of what to do next. What's making us hesitant is we're afraid that we would not be able to buy a house in California if we short-sale our house in AZ, due to bad credit? rules of short-selling?... I know this thread pertains mostly to VA, DC area... are the general rules same across the country? 

Over the years, my husband and I have worked hard to keep a good credit score. Our payments on our credit cards are always on time, and even on a meager resident's income, we managed to always keep our mortgage payments on time (even up to this day that I am jobless and is still currently looking for a new job). 

Will anyone kindly share to us your experience, advise? We will appreciate any helpful response regarding our situation.

Nov 19, 2010 02:22 AM #77
Rainmaker
92,266
Brad Yzermans
First Time Home Buyer & Down Payment Assistance Specialist in So Cal. - Temecula, CA
Temecula-Murrieta-Menifee FHA/VA Mortgage Lender

Frances - Since you are moving for work, and your short sale is not 'distressd', it's likely you will be able to purchase a new home after short selling.  But if that proves to be too difficult, you could purchase a home while simutaneously renting out the AZ home for maybe 1-3 months.....then short sell it.

These are just a few ideas off the top of my head.  I'm a loan officer in Southern California but could refer you to a local loan officer up there up in Nor Cal where my company is actually located if you want.

Nov 19, 2010 03:20 AM #78
Anonymous
Frances

Thank you Brad for your response.  Will you kindly share with us the name of your co-league in Northern Cal?

If you don't mind me asking, do you know how much a credit score would go down if somebody short sales? I've read about 50-100 points, or is this a case by case basis, and how do loan officers/lenders make that determination. Another question I have is do you know how long it takes for short selling to be approved by the bank/mortgage co.? The reason why I am asking is we are trying to get a timeline/estimate when to actually start applying for approval for short sale as well as when to actually put our house on the market for a short sale. We've read that it takes a long time for approval as well as to sell a house (I presume this is from the current state of the housing market). We do really have a lot of questions, and talking to you co-league at NorCal will really be helpful and enlightening.

Once again, thank you very much!

 

Nov 20, 2010 05:36 AM #79
Rainer
135,632
Matt Robinson
Professional Investors Guild - Pensacola, FL
www.professionalinvestorsguild.com

Great post Markita.  We definitely need to get this information out to buyers, because many of them will be sitting on the fence thinking that their short sale has disqualified them from buyer and that may not necessarily be the case. 

Apr 19, 2011 04:52 AM #80
Rainer
334,174
Paul Gapski
Berkshire Hathaway / Prudential Ca Realty - El Cajon, CA
619-504-8999,#1 Resource SD Relo
 

Well sometimes i dont know what to think of short sales. They are getting better and then they are not!

Aug 16, 2011 03:42 AM #81
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Rainmaker
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Markita Woods NMLS#196099

Queen of Mortgages - FHA, VA, Conventional, USDA
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