How long must I wait to buy after a short sale?
This is such a common question that I get all the time now and I feel like there is a lot of confusion going around about the answer. I wanted to get the truth out to the public and let consumers know that there is some hope. Where I believe most of the confusion starts is that there are many different loan programs out there and they all have different seasoning or waiting periods.
Let’s start out with the most common type of financing in our Phoenix, Arizona market. FHA, right now the majority of my clients purchase their homes via FHA financing partly due to the fact that they are extremely easy to qualify for and they require such small down payments. FHA says that you must wait 36 months to buy after a short sale if you were behind on your payments when the house sold and if you were CURRENT on your payments then there is NO seasoning period and you may buy the day after you short sale your house. WOW, I bet you are blown away and never thought you could purchase this soon, the fact is that there was a common misconception that you must be late on your payments for the banks to allow you to short sale. This is clearly not the case, if you have a fantastic agent who knows short sales and what they are doing then they can in fact negotiate without you ever being behind on your mortgage. Now, I can lend you financing on a new home purchase the day after your home sells. If you don’t have a great agent, I understand they are somewhat few and far between however I have a couple that I know would do you justice and you can contact me for their information. Many people say oh well my uncle John is a Realtor and he can help me, my advice is that no one agent specializes in one thing. Have you ever heard the saying “Jack of all trades, but a master of none?” I strongly believe you must work with someone who knows short sales like the back of their hand.
Now that we have covered the FHA loan and to stay away from bad agents, let’s chat about the other loan programs that are out there that will allow you to buy after a short sale. Conventional loans are weighted very heavily on the loan to value meaning how much they are lending you versus the value of the property. I mention this because the more money you put down the lower the loan to value the shorter the seasoning period for conventional loans. With a 20% down payment you must wait 2 years to buy after a short sale, 10% down 4 years and less than 10% you must wait 7 years before buying after a short sale.
VA home loans for veterans have a seasoning period of 24months after a short sale which is quite nice being the fact that they VA also gives 100% financing to qualified veterans. Another great thing about the VA loans is that you can purchase immediately after a short sale if you weren’t late on your payments just like the FHA loan.
This is great information for you to take with you if you have already completed a short sale; my advice is to contact a lender about 6 months before you are eligible to make sure everything is on track so that you can be approved to buy after a short sale. If you are thinking about short selling your home and need a good agent you can contact me by clicking HERE and I will refer you to someone reputable that I trust.
As always, if you have questions on qualifying you can contact me directly at 623.687.7778 and for information regularly you can “Like” The Electric Loan Officer on Facebook by clicking HERE.
-Justin, Electric Loan Officer
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