If you want to buy a home after a short sale, finding the proper home loan may depend on the money you have for a required down payment.
With so many homeowners struggling in today's economic crisis, having a short sale on your credit history is not as uncommon as you may think. If you want to buy a home after a short sale, finding the proper home loan may depend on the money you have for a required down payment.
Before you start searching for a new home through real estate listings, you need to first carefully consider how you will finance your new home. When you buy a home after a short sale, you may not qualify with traditional lenders because most financing has guidelines set by governing entities, such as the Federal Housing Association (FHA), Freddie Mac or Fannie Mae. Selling your home through a short sale can have a serious impact on your credit rating and banks typically follow the guidelines set by these governing entities.
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FHA loan after a short sale
If you want an FHA loan to buy a home after a short sale, you will typically have to wait at least three years if you defaulted on your mortgage. If you do not have a mortgage default and are current on all installment loans for 12 months prior to the short sale, then you may be able to obtain an FHA loan right away. You may obtain a loan sooner than the three-year wait if you are able to re-establish your credit rating and prove extenuating circumstances for the sale of your home.
Fannie Mae and Freddie Mac loan requirements
If you want a Fannie Mae loan for a new home, you will need to wait a minimum of two years after the short sale if you have a 20 percent as a down payment, four years if you have 10 to 20 percent as a down payment, or seven years, if you have 10 percent or less for a down payment. You can also obtain a Fannie Mae loan two years after a short sale if you prove extenuating circumstances and place more than 10 percent as a down payment.
You typically must wait four years to get a home loan from Freddie Mac after a short sale. If you can prove extenuating circumstances forced your home into a short sale, then you can apply for a Freddie Mac loan two years after the short sale.
To buy a home after a short sale, one of the first steps you need to take is to re-establish a good credit history. If you are ready to shop for a new home, go to Reply! to get free property listings for your area.