Some agents or agencies in the Florida area will assist homeowners who find themselves “underwater” on their houses or in a position where they can’t make the monthly repayments.
The professionals let homeowners know, “we buy houses, FL,” or they will help owners pursue the short sale process.
A short sale essentially means the mortgage company releases the lien allowing the borrower to sell the home at a lower price than the current balance forgiving the deficiency.
Following a short sale, qualifying for another mortgage might involve a significant waiting period, saving a down payment, and improving credit.
For a conventional loan, the wait time can be up to four years following a short sale. Let’s review what you can do to get into another home following a short sale.
Is There Home Ownership After A Short Sale
Agents in Florida who help you navigate the short sale process or go a step further and purchase the home for a faster result will also advise you on what to do following the sale. Fortunately, there could be new home ownership in your future with enough time and effort.
You will need to recognize loans will likely come with higher rates as loan providers will heed the side of caution. A lender’s primary concern is that borrowers can repay loans, and applications are scrutinized to make this determination leading to approval and designation of rates.
An individual having gone through a short sale will find their credit score disqualifies them from many loan opportunities since the sale can drop the score significantly in some cases. A wise borrower will work on improving credit before attempting to apply for a new mortgage.
That includes not only raising the score but showing a positive repayment history. Another sign of good faith is a substantial down payment decreasing the lender’s risk. Learn more how a short sale affects credit at https://www.experian.com/blogs/ask-experian/how-does-a-short-sale-affect-credit/.
Credit significantly impacts the loan process. What are the guidelines for the varied types of loans when going through a short sale with suggested waiting periods? Let’s learn.
- A conventional loan
After a short sale, you can follow the process for a conventional loan as soon as two years following the sale with a down payment of 20% included in the application plus “demonstrating extenuating circumstances” for the inability to make the repayments.
You may have experienced a significant health crisis with subsequent medical costs. Another problem beyond your control is if the housing market in your area were to fall, leaving your property at a lesser value than what you currently owe.
If 20% down is too great of an amount, you can save 10%, but you’ll have to wait four years from the sale date. If you can’t put up 10%, it will take roughly seven years to purchase again using a conventional loan.
- An FHA loan
Again, you’ll need to prove there was reasonable cause for the inability to repay the loan, or you will need to wait approximately three years to apply for an FHA loan. If the lender is satisfied with the circumstances, it could reduce the waiting period to a year.
It is possible to apply without a wait if the prior mortgage had not gone into default at the time of the sale, with all repayments made consistently and timely the previous year.
- The USDA loan
Regardless if there are “extenuating circumstances” for the inability to repay, you will need to wait with a USDA loan for three years before applying for a new home loan.
Can You Rebuild Credit Following A Short Sale
When a short sale shows as the only indiscretion on your credit profile, rebuilding through the waiting time frame could happen quickly. If many issues helped establish a low score, it could take time and significant effort to boost the score and create savings for the down payment.
A short sale can be a complex process unless you work with an agency in Florida meant to help navigate the process or perhaps buy the house with cash to move things along more quickly.
From that point, it will be a waiting game until you can get a new home loan, regardless of the type. Read details on getting a home loan following a short sale here.
You can expedite the process with a substantial down payment and a viable explanation for the short sale, plus putting in some time improving credit. Still, new home ownership will have to wait at the very least two years, but it’s not impossible.