Across the country home values have fallen 33% since their peak in 2006. In light of such it’s no surprise that many Americans today have a short sale in their credit histories. With many wanting to become homeowners again, a question we commonly receive is when can I buy a house after a short sale?
First and foremost it is important to understand that there aren’t any restrictions on buying a home after a short sale, just on getting a home loan after a short sale. You certainly are free to purchase a home, you’ll just need to find a very flexible lender (which could be tough) or purchase the home with cash.
Obtaining financing through the traditional sources will be difficult as the majority of financing currently available right now is subject to either Fannie Mae or FHA guidelines, both of which restrict lending to homeowners with a short sale in their credit history.
Short sales and foreclosures negatively impact your credit, and bad credit implies that you as a borrower represent a higher credit risk which in turn hurts your chances of securing a mortgage. The logic is, if you weren’t able to make your payments just a year ago, you’re still considered a risky candidate for a new loan today. But if you’ve come through the hard times and you’re ready to buy again, how long must you wait before the banks will offer you a loan?
Unfortunately there’s no hard and fast answer to this question, but the general rule of thumb is “one to seven years.” Why the large spread? It depends on the type of loan and the circumstances of your default. A VA loan can be available as soon as two years after a foreclosure, providing you meet a minimum credit core (currently 620), while an FHA loan will take three years, with a 640 credit score (It’s possible the waiting period can be reduced or eliminated if there are extenuating circumstances beyond your control that led to the short sale such as: loss of income due to death of family member, severe illness, etc.). Fannie Mae may require a 4-year wait and a 660 credit score unless the borrower can meet additional criteria to reduce risk (it can be as little as two if you are willing to come in with a larger down payment).
Bear in mind that these are minimum guidelines. Depending on your credit history or reasons for default, loan officers may judge you more harshly. For example, if you were perfectly able to pay your mortgage but opted for a short sale or foreclosure because dropping property values pushed you underwater (ie a strategic default), you might have to wait several years longer. You could be perfectly creditworthy, but your actions showed the bank that you had no qualms about walking away, and you might do so again.
Lockouts and loan programs change as often as interest rates, so the best place to start rebuilding is at a loan officer’s desk. He or she will help you build a plan to return to the home buying market from a position of strength. Meanwhile, while you’re cleaning up your credit, start saving. If you want to get back in the game, a large down payment is the strongest mitigating factor in your favor.
| FHA /VA | Conventional |
| Deed in Lieu and Short Sale | Deed In Lieu and Short Sale |
| FHA-3 year waiting period VA-2 year waiting periodBoth FHA and VA require clear Caviers | 2 year waiting period at 80% ltv*4 year waiting period at 90% ltv * |
| Foreclosure | Foreclosure |
| FHA– 3 year waiting period VA –2 year waiting periodBoth FHA and VA require clear Caivrs | 7 years waiting period- all ltv’s3 years with Extenuating circumstancesAdditional requirements after 3 years up to 7 years.
|
| Note on FHA only- SHORT SALE WITH NO MORTGAGE LATES No waiting period if there were NO late payments throughout the entire Short Sale process and the borrower is relocating to another area. |
If you, or someone you know is considering Buying a Home after a short sale or foreclosure in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Salesin; Bexley Columbus Delaware Downtown Dublin Gahanna Grandview Heights Granville Grove City Groveport Hilliard Lewis Center New Albany Pickerington Polaris Powell Upper Arlington Westerville Worthington
