UPDATE as of 11/19/09:
The rule is 2 years on Conventional. However:
- there are probably 10% of lenders that are doing it. The other 90% will not.
- It may also vary upon whether it is a Short Sale with no default in payment history
- or, whether it is a pre-foreclosure that will likely reflect on the credit history
- It will also depend whether the payoff at the time of settlement reflects the deficiency or it does not.
The Rule on FHA. Technically FHA sees this as a Foreclosure (takes 3 years to buy a home) but has not ruled out the possibility that one could obtain a loan in 2 years, however one needs to keep this in mind:
- If there are no lates prior to the short sale and the agreed upon payoff does not reflect the deficiency thus not reflecting on the HUD, then it is likely a good possibility that the client can get the loan in a period of 2 years.
- If there are lates in the history, then it becomes pretty clear it is a pre-foreclosure and they are very unlikely to get the loan (Must wait for 3 years).
- Again, there are probably 10% of lenders that wil do this, the other 90% will not. Keep you eyes open as the lending industry is about to get more strict. My guess is that the 10% will likely cease to exist.
What we need to keep in mind is that we should be careful to imply that this is somehow set in stone. There are way too many variables to risk ourselves in implying that our client "IS" going to get into a home in 2 years. With the way things are going, it likely will not be the case "AT ALL" FHA is having major problems at this time and so is Fannie. In fact, the new rules coming out in the next 60 days will be revolutionary to the way we all are accustomed to.
Posted on 11/13/2009
Let set the record straight! There is too much bad information going on about Short Sales. In fact there are companies right here in Arizona that are conducting Short Sale Seminars teaching agents that the short sale homeowner is eligible for a home loan in 2 years. THIS IS NOT TRUE!! The truth is that FHA was up in the air as to how they would rule on this. So what is the answer? FHA considers a Short Sale the same as a Foreclosure. That means that a would-be borrower is not eligible to apply for an FHA Home Loan for a period of 3 years.
I understand that there is a lot of information out there but I confirmed this with my company's Vice President of Operations who is the Goddess of the Underwriters. She knows her stuff so I believe "EVERYTHING" she says about loans.
DO NOT put yourself in a position where you are misrepresenting yourself (Worse! By handing out the wrong information without even knowing it).
As always, the 90/10 Rule Applies here.. What side will you be on?
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