There have been many questions lately regarding short sales and waiting periods to buy another home. The rules have changed numerous times over the past year and there is a lot of confusion. The requirements for FHA and Fannie Mae are slightly different. For FHA the waiting period is 3 years from the short sale. A credit score of 640 is required.
For Fannie Mae, a 2 year waiting period is required with a 20% down payment. A 4 year waiting period is required with a 10% down payment and after 7 years a 5% down is allowed. Any down payment less than 20% will require a credit score of 720 or higher. A credit score of 640 is required for a 20% down payment.
There are some shortened time periods with extenuating circumstances, however these are very difficult to document and are very subjective and up to underwriter discretion.
Another topic that comes up often is can we buy another house if we can't sell our existing home. Again, FHA and Fannie Mae differ in their requirements although they are somewhat similar.
In both cases, the existing home can be used as a rental property. Borrowers will need to qualify using both payments on the existing property and the new property and it should "make sense" for the borrower to be moving. Underwriters are very sensitive to "buy and bail" scenarios. So generally, it should be a move up situation. No rental income will be used to offset payments unless there is a 30% equity in the existing property for Fannie Mae or 25% for FHA. Borrowers will also need to have 6 months payments for both properties in reserves in addition to down payment for Fannie Mae loans.
I hope this information is helpful. If you have any questions or would like more information, please feel free to call me.
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Keller Williams Realty
license # 01347819