Have you gone through a foreclosure or short sale in recent years? Ever wonder how long it will be until you qualify to purchase again? This handy chart takes the guess work out of this sometimes complicated process. Please feel free to contact Kelly Zitlow if you feel that you are ready to purchase and would like to know how much you qualify for.
Many homeowners think if they go to foreclosure they “wipe their hands” from their lien and will never hear from their old lender again. Often, homeowners will avoid a short sale because they think they will have to re-pay part of their mortgage yet think if they go to foreclosure, they are “free and clear.” Contrary to this belief, in many states the lien holder has 5-6 years to contact the homeowner for deficiency judgment. With a short sale, a good listing Realtor will ask the bank upfront if the seller will be held liable for a future deficiency payment. Banks are sending these unpaid liens to credit agencies, so it is not rare, both with short sale and foreclosure, that a creditor will be calling a seller that went to foreclosure.
Last month, FHA released yet another mortgagee letter clarifying FHA’s position regarding borrowers who recently had a short sale on a primary residence and want to purchase a new primary residence using an FHA loan.
Summarized below are a few of the key points:
1) These changes are effective immediately
2) Borrowers are not eligible for new FHA financing if they pursued a short sale agreement on his or her principal residence simply to:
Take advantage of declining market conditions, and
Purchase ,at a reduced price, a similar or superior property near the residence they completed a short sale on (this is a key point)
3) Borrowers are eligible for new FHA financing if:
All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
All installment debt payments for the same time period were also made within the month due, and
The proceeds from the short sale serve as payment in full (another key point)
4) Borrowers whose mortgage was in pre-foreclosure status at the time of short sale are not eligible for FHA financing for 3 years unless they qualify for an exception
So yes, this means if you just sold your home via short sale you COULD qualify to purchase another home through an FHA loan (if eligible based on the requirements above) without waiting 2-3 years.
If you have questions or want to see if you are eligible, contact Kelly Zitlow at Suburban Mortgage, firstname.lastname@example.org or 480-355-8105.