FHA Mortgage after a short sale is a good option for the homeowners who are underwater and they sell their home for less than what they originally owe; they can qualify for an FHA Mortgage after a short Sale. Short sale puts homeowners in a riskier category for a new mortgage where normal lenders are concerned. If we look towards the government Federal Housing Administration loan, then it means that less strict demands to qualify for the Federal Housing Administration loan, lower down payments and competitive interest rates. FHA is an alternative which is explored by many of the short sale survivors. The homeowners can submit an application for the FHA loan within three weeks of closing on their short sale as long as no default judgment has been recorded on them.
FHA Mortgage After A Short Sale
Scott Schang, manager at Broadview Mortgage Katella in Orange, Calif says that nowadays, in the tight lending environment, many of the homeowners, like to think that it is nearly impossible to qualify for an FHA mortgage after a short sale, but Schang says that’s after a short sale there is a light at the end of the tunnel and it is not far away.
If someone lost his or her home and wants to get another mortgage loan, then he or she will be wondering that how long he will wait for the another mortgage loan. The homeowner’s credit will take a hit after a short sale, especially if they had lost the house through the foreclosure. The short sale prevents the homeowners’ from getting another mortgage right away. The period of time homeowners has to wait before applying for a new mortgage depends on the type of the lender and homeowner’s financial circumstances.
Requirements To Qualify Or A FHA Mortgage After A Short Sale:
Normally short sellers have to wait at least two years after closing the short sale to qualify for the mortgage. But the time frame and requirements for a mortgage depends on the type of loan and the down payment. The minimum wait period and down payment requirements to get a standard and normal home loan after short sale are;
- Two years wait with a 20 percent down payment,
- Wait four years with a 10 percent down payment, and
- Seven years wait with less than 10 percent down payment.
For the Federal Housing Administration loans, there is three years waiting period from the short sale closing date and homebuyers can get a mortgage with as little as 3.5 percent down. Whereas those who qualify for a Veterans Affairs loan have to wait for two years and they are not required to make a down payment.
Schang says that the Federal Housing Administration is the shortest way for the buyers with less than the 10 percent down. After the waiting period the borrowers can qualify for the same federal Housing Administration loan as the person who never had a foreclosure or short sale. Many of the lenders want to know the circumstances under which the homeowners choose for a short sale.
Basic Steps to Get a Federal Housing Administration Loan after a Short Sale:
The amount of time homebuyers has to wait to obtain a new FHA mortgage, varies depending on the buyer’s credit history and the reasons for the short sale. If buyers were not in the default on the prior mortgage at the time of the short sale, they would not have to wait for any period of time to get an FHA mortgage. But if buyers were in default on the old mortgage loan at the time of the short sale, then they must have to wait for at least three years before applying for another Federal Housing Administration loan. After waiting for the three years buyers will be able to qualify for an FHA mortgage sooner if they are not facing any serious illness or death in the family, divorce and job loss. The basic 4 steps to qualify for an FHA mortgage after a short sale are as under.
After a short sale buyers have to wait for three years if they were irresponsible in their mortgage payments before applying with an FHA approved lender or broker for a new mortgage. Buyers should immediately apply after a short sale if buyers stayed current on their mortgage for the previous 12 months. It should be known that the mortgages for buyers with credit scores under 620 need manual underwriting from lenders, a process that takes more time than ordinary underwriting and can involve closer credit inspection.
Buyers have to track their debt-to-income level. Buyers should keep the ratio below 43 percent of total household income to qualify for an FHA loan after a short sale and to avoid having the loan manually underwritten by the lender. Buyers have to pay down their credit debt to 25 percent of the amount of credit available. Buyers should pay all their bills on time and get rid of all unnecessary expenses and should start a savings.
Buyers have to shop for a property that costs no more than 2.5 times their total household income. They expect to pay a minimum of 3.5 percent of the sales price or appraised value as a down payment if their credit score is above 650 with higher down payments expected of those who have lower credit scores.
Buyers have to show job and income stability by staying employed for more than one year and providing the pays receipts, income tax returns and bank statements verifying their status.