How long will a former homeowner who sold through a short sale or foreclosure have to wait before they can buy another home?
Here are the updated, soon to be released NEW rules….this information was provided by our contacts within Bank of America.
Waiting Period Requirements to Buy a Home Again.
The waiting periods in order to qualify for a home loan after a foreclosure, deed-in-lieu, short sale and bankruptcy varies both by the government agency purchasing or insuring the loan as well as the dollar amount of the loan.
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Federal Housing Administration (FHA)
1) Foreclosure is 3 years
2) Deed-in Lieu is 3 years
3) Short Sale is 3 years
4) Bankruptcy is 2 years
Veterans Administration (VA)
1) Foreclosure is 2 years
2) Deed-in Lieu is 2 years
3) Short Sale is 2 years
4) Bankruptcy is 2 years
Conventional Conforming (FNMA/FHLMC)
1) Foreclosure is 7 years
2) Deed-in-Lieu is 4 years < 80% LTV and 5 years > 80% LTV for primary residences. 7 years for second homes and investment properties regardless of LTV.
3) Short Sales is 2 years < 80% LTV and 5 years > 80% LTV and 7 years > 90% LTV
4) Bankruptcy is 4 years
Conventional Non-Conforming (JUMBO)
1) Foreclosure is 7 years
2) Deed-in-Lieu is 7 years
3) Short Sale is 7 years
4) Bankruptcy is 7 years
Tim and Julie, very timely.
You left out that if a homeowner is able to maintain their payments throughout the process they may be eligible to purchase again right after closing.
Thanks Tim and Julie. This is really concise and easy to understand. While I truly appreciate that, my experience makes me a bit wary of unattributed data. Would you be so kind as to tell us the basis of this data, please?
Obviously we want to be extremely careful as we dispense information to our clients. I will continue to recommend that my clients verify with an attorney, prior to making a decision which considers the possibility to purchase again later. However, without “practicing law”, I’d like to be able to define their future options honestly and with total authority based on verifiable facts.
So, again, will you please tell us your source materials?
Thanks, Bruce
Also, This is for Greg Cook. Re; “You left out that if a homeowner is able to maintain their payments throughout the process they may be eligible to purchase again right after closing.” Greg, this is a pretty broad and vague statement. Does this apply just to short sales, I assume? Fannie, Freddie, FHA, VA?? And, I keep hearing various people make similar statements but do you have concrete evidence/source material for this? Unfortunately, anecdotal buzz usually turns out to be woefully unhelpful.
Here is my source:
Kevin Budde. Kevin is Bank of Americas #1 LO for…the entire nation. Nothing but positive experiences with Kevin and his team reported to us from HREU students.
Email:
kevin.budde@bankofamerica.com
Tim
Tim & Julie,
Thank you for the information.
Greg,
I’ve heard the same thing and have had an experience directly with Wells Fargo. The Short Sale was with Wells Fargo and the new loan was with Wells. The real determination is “WHY” the need for the short sale. In my client’s case, it was a forced relocation from one coast to the other. The client remained current and was able to close successfully on his new home.
I’ve also successfully closed a VA short sale with a concurrent new purchase. The Veteran was deployed and the sale was deemed necessary… again, the client remained current.
I think it all falls back on the “why”.
Hope this helps,
Sharon
I have a problem with a short sale and the no harm no foul because the seller is current. The contract/loan agreement was between a lender and a borrower. The lender agreed to loan a dollar amount and the borrower agreed to pay back the amount loaned plus interest. The fact that a house was collateral does not somehow mitigate the agreement. If you loaned money to a friend and the friend decided for whatever reason it’s okay to pay back a lesser amount would that be okay? You legally and morally owe the amount you borrowed plus interest. Why is it okay to void the agreement when the borrower is capable of making the payment?
Same reason that a strategic default is part of any commercial investors financial planning tools. For investors, this is a matter of money and ROI.
Think of it this way..you buy any ‘investment’…that investment sours…do you keep dumping money into it or do you take your financial hit and walk away.
I have Fannie Mae stock…trust me when I tell you that I wish I would of sold it. When it became clear it was going to be worthless I didn’t simply keep dumping
money into it. I had the option of taking my losses and moving on. Why should real estate be treated any differently?
A mortgage note/ agreement clearly states what happens when the payment is made (use of the home, potential upside appreciation..really inflation). The same note clearly states
what happens if someone stops making the payments…the bank gets it back. Bottom line, the bank and the borrower agreed to all aspects of the note/ contract. If the borrower
decides to default, that is their choice as determined by the original mortgage loan.
Fact is, the best thing that could happen is if there was a viable option for underwater owners to KEEP their homes and have the negative equity..wiped out. What impact does
that negative equity have on that owner? Do they spend on other stuff, do they move to other locals…do they move up or down. Nope, they are just stuck.
We proposed a new program that we are calling…a Radical Refinance. Negative equity is wiped out. In exchange the banks get a % of the potential appreciation of the home. That % goes down
as time passes…maybe after 10 years the bank no longer has any piece of the potential appreciation of the home (once its sold). Reasoning being that the banks have gotten their profit from the
payments etc. Lots of details to work out…but, thats the idea. People keep their homes, neighborhoods become viable again….our industry returns.
Tim
How does one track or run down a house that is in foreclosure with BoA?
Jay
Regardless of the servicer (BoA etc) if the property is in default its public info. Sites like ForeclosureRadar.com provide info more or less effortlessly.
Tim
Thanks.
What site deals with forclosures in Montana?
No idea…my sis lives in Montana…I will ping her and ask.
But, I suspect the best way to find NODs (notice of defaults) in Big Sky Country is going to be Realtors/ local attorneys..or title escrow companies. Start with an agent who has existing REO/ Foreclosure listings.
Tim
Hey Tim,
I have a short sale listing right now and the only reason he is selling is so he can move to another town for work and would not be able to make two mortgage payments. My client is still keeping up on the payments so he will have no dings on his credit report. That being said…Does he still have to go through the waiting period even though he will show no mortgage lates on his credit?
Thanks!
Zack
Depends…on his overall credit. The credit killer in a short sale are the missed payments…missed payments reduce scores vs the actual short sale.
Have him work with a lender who is an actual Fannie/ Freddie lender..Kevin Budde is BoAs #1 LO for..the entire nation. He is a friend of HREU..contact him:
kevin.budde@bankofamerica.com
Tim
With regard to short sales another factor that one of my lenders provided was the time factor is reduced if the short sale seller did not fall behind on their payments. He indicated that the conventional 2 year restriction is reduced to one year if prior to and during the short sale they had no derogatory credit hits like late payments. Have you heard anything along those lines?
With so many who have lost their homes, showing them the different time frames will now give them an idea of what they are up against the next time around…good breakdown.
Re: waiting period. NAR published this last year (I know, that’s a long time ago in a rapidly changing world):
Government Affairs Update
Impact of Adverse Credit Events on the Ability of Consumers to Purchase Another Home
(August 11, 2010)
FHA
Short sale
No wait if not in default.
Now, here is the tricky part: Buyer can get a new FHA if they had a Conventional loan short sale (But not if their short sale was of an FHA loan) – For one thing (and this from HUD’s 800 number yesterday – “FHA DOESN’T HAVE A SHORT SALE per se, but a PRE-FORECLOSURE SALE” In order to qualify for an FHA Pre-Foreclosure sale THE BORROWER MUST, MUST BE AT LEAST 30 DAYS LATE.
It seems to be getting worse. Yesterday 2/14/11, my negotiator at BofA told me that a new FANNIE MAE guideline now requires borrower to be at least 60 days late – which is the same as Freddie.
It appears to me that a bunch of ‘catch-22′s’ are being set up which effectively prevent a short-seller from getting a new loan (even and FHA) immediately after the short sale.
Someone please tell me I’m wrong and how it can be done. Thanks!!
I had a short sale a year ago due to divorce. I could not afford to make the payments on my own so the lender suggested a short sale. The lender also informed me that it did not matter if I made partial or no payments until sale, which was about 7 or 8 payments. The bank, however, did accept the offer in full and the house sold; I owe no money at all to the bank.
My credit is great and I have no other reason besides the short sale to purchase another home.
Do I still need to wait 3 years to purchase a home, FHA?
Thanks for your help.
Jean
Hi Jean,
Maybe not. Contact a FHA lender. Be careful, not all lenders are FHA approved. You want an actual…honest to God…FHA lender. (vs a broker)
Tim