Almost every day we get a question from a client who wants to know their options for getting a mortgage after experiencing a short sale or foreclosure.
Below is a helpful chart that has the current guidelines for the waiting periods for homeowners that recently experienced a short sale, foreclosure, or deed-in-lieu. The guidelines change frequently, but this gives you an idea of where the timelines stand today.
You will see in the chart that the time frames for any of the four are less if the short sale, deed-in-lieu or foreclosure were cause by “extenuating circumstances” that were beyond the borrower’s control. If there were extenuating circumstances, what happened MUST be fully documented. If it can’t be proved beyond a shadow of a doubt, borrower will have to wait before the prescribed amount of time before qualifying .
| FNMA Short Sale and Deed-in-Lieu | No Extenuating Circumstances: 2 years with 20% down, 4 years with 10% down7 years with 5% down | With Extenuating Circumstances beyond the borrower’s control: 2 years with 10% down |
| Foreclosure | 7 Years | 3 Years with 10% down |
| Freddie Mac Short Sale and Deed-in-Lieu |
No Extenuating Circumstances: 4 years with 10% down | With Extenuating Circumstances beyond the borrower’s control: 2 years with 10% down |
| Foreclosure | 7 Years | 3 Years with 10% down |
| FHA Short Sale |
Borrower current at time of short sale – immediately if mortgage payments and installment debt payments for the last 12 months were all made on time and borrower not trying to take advantage of a declining market. Borrower in default at time of short sale – immediately if default was due to circumstances beyond the borrower’s control and the borrower had satisfactory credit before the extenuating circumstances cause the default. OTHERWISE: 3 YEARS | |
| Foreclosure and Deed-in-Lieu | 3 Years* May be less if due to extenuating circumstances. | |
| VA – Short Sale/Deed-in-Lieu and Foreclosure | 2 Years (1 year possible with re-established credit (Underwriter’s decision) | |
* Extenuating circumstances – Fannie Mae and Freddie Mac – “non-recurring events” beyond the borrowers control that result in a sudden significant, and prolonged reduction in income or a catastrophic increase in obligations—(divorce, illness, job loss etc.) all must be fully documented and proven.
* Extenuating circumstances – FHA – death of a primary wage earner, long-term uninsured illness or divorce where the ex-spouse got the home and was later foreclosed on. (Job loss, job transfer or inability to sell the home are not considered extenuating circumstances)