Buying a home after a short sale can be an interesting process, however, it still can be done by taking the proper steps. Completing the appropriate measures in this process is crucial to you ultimately achieving your goal: owning a home.
The short-sale process takes place when a homeowner decides to sell their home for an amount that is less than what is owed to their mortgage company, thus not every lien or debt on their property has been finalized. Even after selling the property, the seller is responsible for the balance on the property’s debt. Reasons for a homeowner to do a short sale include avoiding foreclosure, having to move or also owing more on their home than it’s worth.
Several factors can influence your eligibility for purchasing a home after a short sale. Aside from needing sufficient income, one must possess solid credit, have paid their bills in a timely manner for a year and possess the funds needed for their down payment. After a short sale, it’s certainly possible for someone to buy a home 12-26 months later, depending their loan program.
Loan options include FHA, Conventional and VA loans. While no down payment is associated with using a loan from the Veterans Administration, FHA loans have a minimum 3.5% down payment and Conventional loans require a 5% down payment. Other loan options could be available, and it is advised that you speak with C2 Financial for further information.
A prominent question regarding those looking to buy a home after a short sale pertains to waiting time. For VA loans, the standard wait time is two years, while FHA loans and Conventional loans have wait times of three years and four years, respectively. However, under the FHA’s “Back to Work” program, a wait time of only year is needed. The FHA has also included guidelines on immediate eligibility, based on not having any late payments on your mortgage and existing debts for a previous year.
As stated before, VA loans have a typical wait time of two years regarding when one can buy a home after a short sale. However, if you have a minimum credit score of 660 and have not been late on any mortgage payments prior to the short sale, some lenders may only require as short as a one-month waiting period.
In regards to Conventional mortgages, it is possible to buy a home two years after a short sale with a 20% down payment. Yet purchasing a home after just two years with only a 10% down payment can be accomplished if you have endured mitigating circumstances that are justifiable and documented.
It is imperative for anyone looking to buy a home after a short sale to maintain and repair their credit, as well as stay current on all of their bills. Also, do not let a technical error in the process hurt your efforts, as accurate reporting and proper documentation of your short-sale information is crucial. Having your short sale mistakenly reported as a foreclosure could lead to serious obstacles. Another pitfall to avoid is not taking advantage of the downtime between mortgages, which is the perfect time to begin saving for a new down payment and rehabilitating one’s credit.
Gold Star Mortgage has the experience and savvy to help you buy a house after a short sale. Call (925) 930-7870 today!