Getting A Mortgage after A SHORT SALE

By
Mortgage and Lending with PNC Mortgage, a division of PNC Bank, NA
  Getting a mortgage again after a Short Sale or Deed-In-Lieu can be difficult; but if you follow these simple guidelines to qualify you will be well on your way to owning another home. Both a Short Sale and Deed-In-Lieu are preemptive ways to avoid Foreclosure, but both are viewed as a default in the eyes of the lending industry.
  Let’s begin with the definition of Short Sale. The lending industry calls this a “Pre-Foreclosure Sale” meaning that the lender allows you to sell the home (collateral) before the lender takes it from you in a formal process called a foreclosure. The term “Short Sale” comes from the lender accepting a sale price for less than is owed. The “Date of Event” for a Short Sale will be the date of the closing as per the HUD1.
  A Deed-In-Lieu of foreclosure is offering your deed of ownership to the lender to avoid the home being taken from you in a formal foreclosure. The “Date of Event” for Deed-In-Lieu will be the date on which the new deed and title was recorded.
  It is important to point out that the following guidelines are not the same as when someone has lost their home through a formal foreclosure. See our post about qualifying for a new mortgage if you have a Foreclosure on your credit – Click Here.
  The following rules and guidelines are currently in place as of the publishing of this post. We will do our best to keep this post updated as changes are made. As we do in all our guideline type posts, the easiest way to break them down is by Loan Type. We encourage you to email or phone us if you have specific questions.
CONVENTIONAL FINANCING
  The amount of elapsed time from the date of event will vary based on the new Loan-To-Value (LTV). The table below outlines these time lines and LTV’s.
ELAPSED TIME
MAXIMUM LOAN-TO-VALUE
Less than 24 Months
Not Allowable
24 Months
80%
48 Months
90%
72 Months
Standard Guidelines
  As you can see, 2 years is the absolute minimum amount of elapsed time. Unlike other obstacles to qualifying such as Bankruptcy or Foreclosure, there is no waiver of the two years for extenuating circumstances.
FHA FINANCING
  There are two distinct ways to qualify for a new FHA mortgage if you have a Short Sale on your credit.
  In Default at time of Short Sale = 3 Years - If the borrower was in default or behind on payments at the time of short sale there is a 3 year waiting period. There is an exception to this for those that had experienced a hardship such as death of a primary wage earner, long term illness etc. Generally these events need to substantiated as being beyond the control of the borrower. Additionally, all other credit accounts and installment credit history must show as being made on time prior to the event.
  Not in Default at time of Short Sale = No Waiting Period – If the borrower made payments on the mortgage within the month due for the 12 months prior to the short sale along with any installment (ie Auto Loan) payments and the short sale was accepted by the lender as payment in full, they qualify for FHA financing immediately.
  Contrary to popular thinking, a short sale can be accomplished WITHOUT being behind on payments. Unfortunately some lenders and real estate professionals inform clients that they need to miss two or three payments before they will be considered for short sale approval. This is not accurate. In some cases such as job relocation, medical reasons, and family needs, a non-default short sale is possible. While not easy to achieve, they are and can be done with the help of a good attorney.
VA FINANCING
   VA guidelines call for a two year waiting period since the date of event. Some borrowers may qualify prior to the 2 year anniversary; however it can be difficult to get approval. The VA has the following rules for qualifying inside the 24 month window:
  Applicant or Spouse has re-established credit since the date of Foreclosure   and can show that the foreclosure was caused by extenuating circumstances   beyond their control.
  Divorce is not generally viewed as being beyond the control of the applicant or spouse
  We try to break down the information to make it as easy to understand as possible. We are always happy to answer any specific questions you may have or assist you in obtaining financing.
The Himmelwright Mortgage Team
Jonathan & Paula Himmelwright
Professional Mortgage Advice and Originations Nationwide
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Rainmaker
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Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

This question comes up quite often.  Thanks for this very helpful explanation.

May 16, 2011 02:58 PM #1
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