In the last few years, millions of American homeowners just like you have had to go through a short sale. The good news for these homeowners is that they have been able to buy again after, in just a few months.
That’s right: some mortgage loan programs today may allow you to obtain a new mortgage in as little as 12 months after a short sale.
Some borrowers may not be able to qualify for a USDA home loan after a few months of a short sale, but it is certainly possible, depending on the chosen property and location.
Being able to buying a home again after a short sale would usually depend on the type of mortgage loan you are trying to obtain next. Every mortgage program has their own set of guidelines in regards to buying again after a short sale. Differing from one program to the next are:
- FHA Home Loans
- Conventional (Fannie Mae Home Loans)
- USDA Home Loans
- VA home loans
Buy Again After a Short Sale: Obtaining an FHA Home Loan
Obtaining an FHA home loan after a short sale is one of the more common scenarios that we see today. The waiting period to buy again after a short sale with FHA is less than all other mortgage programs offered today.
The great thing about FHA home loans for many boomerang home buyers is that you wouldn’t have to be a Veteran or look for a qualifying area to be considered as eligible. VA home loans may offer great benefits and a shorter waiting period but in order to qualify for such a loan, you would have to retain a Veteran status or active duty servicemember. USDA home loans on the other hand is designed for homeowners who are looking to buy and settle in a rural and densely populated area with only 25,000 or less people to be considered eligible.
FHA Mortgage Insurance Premiums
Keep in mind that if you do choose to buy again with an FHA home loan, the program requires that borrowers take on mortgage insurance premiums. FHA’s mortgage insurance premiums (MIP) are usually split into two parts.
The first part of the premium is what is known as an Upfront Mortgage Insurance Premium (UFMIP), which is due at the time of closing but can also be added to your monthly mortgage payment. Note that this is usually not counted against a borrower’s loan-to-value (LTV).
The second part is the Annual MIP. The FHA Annual MIP rates vary depending on the length of your loan, the loan amount, and your initial loan’s LTV.
New Reduced FHA Mortgage Insurance Premium Rates
FHA home loans has become more affordable for borrowers in 2015. The Federal Housing Administration (FHA) has reduced its annual mortgage insurance premiums (MIP) by up to 50 basis points for new FHA mortgage borrowers.
An announcement in regards to a reduction in Annual FHA Mortgage Insurance Premiums was made by the Obama Administration on January 8, 2015 and is effective as of January 26, 2015. All FHA borrowers with a case number assigned to them on January 26, 2015 or post effective date may be eligible for new reduced annual mortgage insurance premium rates.
Existing homeowners may also take advantage of this new reduction in MIP rates if they choose to refinance into an FHA mortgage as stated in the Mortgage Letter 2015-01 from the United States Department of Urban and Housing Development (HUD).
FHA home loans is one of the most affordable even with the requirement of mortgage insurance premiums, especially now that the MIP rates have been reduced for new borrowers.
Buy Again with FHA in 12 Months After Short Sale
Yes, the waiting period for homeowners who have had to short sell their homes have been reduced from the traditional 3 years to 12 months. This is if you have been able to re-establish your credit and have been able to satisfy any loan amount owed on the mortgage that you short sold on.
Buy Again After a Short Sale: Obtaining a Conventional Home Loan
While the majority of borrowers are led to believe that a Conventional home loan requires for at least a 20 percent down payment, this is not entirely true. However, by making a down payment as large as 20 percent, this may be able to help you steer away from having to pay for mortgage insurance.
There are different Conventional mortgage programs that may even allow for a down payment as little as 5 percent if you were to add mortgage insurance depending on your loan scenario. Several homeowners have been able to compare this with an FHA home loan and as it turned out for some, they actually see it as a better option to go with.
Despite what you have been told, it is always in your best interest to consider all mortgage products before deciding that it is not for you.
The wait period after a short sale required for a Conventional mortgage does vary depending on your down payment, such as:
- Down payment of at least 20 percent – Usually requires for homeowner to wait two (2) years after short sale.
- Down payment of at least 10 percent – Usually requires for homeowner to wait five (5) years after short sale.
- Down payment of less than 10 percent – Usually requires for homeowner to wait as long as seven (7) years after short sale.
Buy Again After a Short Sale: Obtaining a VA Home Loan
VA home loans comes with a great deal of benefits that all qualified Veteran borrowers and active duty servicemembers can take advantage of, such as:
- The option of 100% financing
- No down payment required in most cases
- No mortgage insurance required
VA home loans should definitely be taken into consideration if you are a veteran or an active duty servicemember and can be the easiest to qualify for. The usual wait period after a short sale is typically two (2) years.
Other times, depending on the VA lender, under the right circumstance, the homeowner may only have to wait for one (1) month.
You may have a chance at getting approved for a VA mortgage loan if you have made your payments on time prior to the final short sale on your previous mortgage, and a credit score of 660 or higher. It is best to work with a VA-Approved lender to ensure that your particular situation is analyzed thoroughly.
Going back to the two years wait period, this can be applied to borrowers who were late on their payments prior to their short sale. Most lenders may also expect for you to have no late payments on any type of credit accounts that you currently have open within the past 12 months prior to applying for a VA home loan.
This is a part of rebuilding your credit and the most plausible way for them to see if you are financially ready to take on another mortgage loan.
Buy Again After a Short Sale: Obtaining a USDA Home Loan
USDA home loans and VA home loans are one of the most specifically designed mortgage programs around today. The United States Department of Agriculture (USDA) Home loan was made for those who are considering a purchase of a property located in USDA-approved rural areas within the United States. In other words, the location in which a property is located must be in a densely populated area making up of 25,000 residents or less.
In order to obtain a USDA home loan after experiencing a short sale is usually less than three (3) years with a minimum credit score of 640 or higher.
Buy Again After a Short Sale: Obtaining a Jumbo Home Loan
One of the toughest home loans that a borrower can obtain after going through a short sale is a Jumbo mortgage. Not only is it a program that requires the longest waiting period, but Jumbo mortgages tend to require the most down payment.
Jumbo home loans are designed for a mortgage loan amount that exceeds the maximum loan limit of $625,000. As of 2015, the waiting period to be considered eligible for a Jumbo purchase home loan after a short sale can be as long as four (4) years, in which has been reduced down from its traditional seven (7) years.
Please make note that if the short sale falls under the qualifying criteria of an extenuating circumstance, the waiting period may be reduced. Make sure to speak with a Jumbo mortgage lender for more details as it is in your best interest to do a thorough research on each program considered.
Buying Again After a Short Sale: Get Approved Today
There are several mortgage programs available to choose from, with different sets of guidelines to consider. The best way that you can obtain a mortgage loan again after a short sale is to speak with a lender who has a background of specialty in this type of lending scenario.
There are several lenders who may have “portfolio products” that are not FHA, VA, USDA or Conventional loans, so if you can find a lender who offers one of these, many times that is your best option. Submit your information below and we will work hard to match you up with a lender who specializes in helping people in your situation so hopefully you can get approved for a mortgage and get into a new home today!