Hey everyone, one of the biggest questions I get from clients is “how
long will it take before I can purchase again after a short sale?”.
The answer to this has been evolving over the past 5 years and will
continue to evolve over the next 5 years.  Right now, today, there are
two main options to obtain financing.

How to Purchase a property after a Short Sale

• FHA Financing:

FHA financing has remained extremely popular among buyers especially
because it may only require a 3.5% down payment as opposed to 10-25%
for a conventional loan.  FHA loans are for buyers purchasing an owner
occupied property and the rates are extremely competitive.  FHA
requires a borrower who has completed a short sale to wait 3 years
before they can be considered for financing.  The guidelines are
strict and are not as flexible for buyers obtaining conventional
financing… however the small downpayment more than makes up for the
upfront hassle.

• Conventional Financing (Non FHA loans)

Most conventional (non-FHA) loans available from mainstream lenders
are insured by Fannie Mae and Freddie Mac.  Both of these institutions
require a minimum 2 year waiting period for buyers who have completed
a short sale.  The big caveat here is that they also require a minimum
down payment of 20% to be considered after the 2 year mark.  Buyers
can choose to wait an additional 2 years if they wish to only put 10%
down.  By that time, however, you would already qualify for FHA
financing (3 years minimum) so it would be wise to consider that
financing route instead.

• FHA / Extenuating Circumstances

FHA guidlelines do allow for an exception to the 3 year waiting period
for short sellers.  If a borrower can plead and make a case for
‘extenuating circumstances’ they can avoid the waiting period all
together.  Extenuating hardships might include illness, temporary
medical issues, job transfer, or natural disaster affecting the
property.  It is solely up to the lender to approve or deny the
extenuating circumstance and whether it would qualify as legitimate.
Hardships such as job loss, adjustment of an interest rate, or
underwater property do not qualify.  We have worked with borrowers who
we have helped short sale in the past who have already gotten approved
for this type of program… so it IS happening.

If you are getting closer to these 2-3 year timelines and curious
whether you can qualify feel free to call me to discuss your situation
and I can help get you in touch with the right people to find out
more.  In the meantime, pay your bills on time, every time, and make
sure all your other financial matters are handled so there are no
surprises when your waiting period is up.

I hope this is helpful, let me know if I can be of service to you,
your friends, or family when it comes to short selling or buying.

Related posts:

1. Postponing a Trustee Sale Date with OneWest Bank to Short Sale
2. Bankruptcy vs. Short Sale
3. Short Sale Update on Senate Bill 458 and how Junior Liens are handling short sales
4. Chase offers Active Military $10,000 to Short Sale their home
5. New Short Sale Legislation?