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FANNIE MAE SHORT-SALE GUIDELINES ON CONVENTIONAL LOANS
Can a home buyer qualify for a conventional loan after short sale in 4 years from the date of the short sale with 5% down payment.?
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A conventional loan for a home can be granted to a buyer five years after the sale when they have already paid 5% of their mortgage. The following are some basic details:
Waiting Period for Conventional Loans After a Short Sale
Standard Waiting Period: The usual time to wait before qualifying for a conventional loan after a short sale is four years.
Exception: Sometimes, lenders will consider that the short sale was due to unavoidable circumstances, such as a job loss or serious health problem. Then, reduce the waiting period to 2 years, which is uncommon and often requires solid documentation.
Down Payment Requirements
Minimum Down Payment: For those who have waited out the four years, usually a 5% down payment required
Higher Down Payment: If your credit score suffered from this event. Some lenders may want more money upfront as an extra assurance against riskiness.
Credit Score Requirements
Good Credit: You typically need at least a 620 credit score to qualify for a conventional loan; however, higher scores (680+) might be necessary after experiencing short sales for best terms.
Rebuilding Credit: Restoring one’s reputation by not making late payments is crucial. I am avoiding significant negative marks on the record after having undergone such a process as selling property below its market value.
Other Considerations
Debt-to-Income Ratio (DTI): Your ability to manage your new mortgage payment and other debts will be assessed based on your DTI ratio, which must fall within acceptable limits set by your lender.
Reserves: If further cushioning against default risk is needed, the lender may require that the borrower have a certain amount saved up, which can cover several months’ worth of mortgage payments.
As long as you meet the minimum four-year waiting period and can put at least five percent down on your prospective home. You should qualify for a standard type of loan. Work on getting your credit score up to par and ensure that your debt-to-income ratio is reasonable so the deal goes through without problems.