Conventional Mortgage after Short Sale and Deed-In-Lieu
This blog will cover conventional mortgage after short sale and deed-in-lieu of foreclosure. Homeowners who have had a deed-in-lieu of foreclosure or a short sale can qualify for a Conventional mortgage after short sale and deed-in-lieu after four year waiting period. The 4-year waiting period start clock starts from the recorded date of the deed in lieu or short sale date.
The waiting period requirements after a short sale, deed-in-lieu, or foreclosure start date is from the date of short sale or the recorded date of foreclosure or deed-lieu of foreclosure.
The waiting period is extended to 7 years after standard foreclosure to qualify for Conventional loans. There is a mandatory 3-year waiting period after the recorded date of foreclosure/deed in lieu to qualify for USDA and FHA loans. There is a two-year waiting period after the recorded date of foreclosure/deed in lieu or short sale to qualify for VA loans. Fannie Mae and Freddie Mac changed the 2-year mandatory waiting period after a deed-in-lieu of foreclosure or short sale for a conventional loan with a 20% down payment is no longer valid.
Waiting Period Requirements on Conventional Mortgage After Short Sale and Deed in Lieu
Fannie Mae’s waiting period after a deed-in-lieu of foreclosure or short sale guidelines will allow a mortgage loan borrower to qualify for a mortgage loan after four years from the date of the deed-in-lieu of foreclosure or a short sale with a 5% down payment. Re-Established credit and no late payments are normally required. One or two late payments after a housing event or bankruptcy are not a deal killer.
Qualifying For Conventional Mortgage After Short Sale And Deed In Lieu
One of the many mistakes potential homeowners make is that they take for granted that they will automatically qualify for a conventional mortgage loan if they had a prior deed-in-lieu of foreclosure or a short sale. Homebuyers can qualify for a Conventional Mortgage After Short Sale And Deed-In-Lieu if they meet the four-year waiting period.
Fannie Mae and Freddie Mac set the conforming guidelines with requirements on the waiting period for a conventional mortgage after short sale and deed-in-lieu of foreclosure.
Because the four-year waiting period has elapsed, it does not automatically insure conventional mortgage approval. The borrower needs automated underwriting approval by Fannie Mae and Freddie Mac. Not everyone gets an approved eligible per AUS FINDINGS. Mortgage Applicants need to meet other Conventional Mortgage Guidelines. The automated underwriting system will evaluate all other aspects of borrowers’ credit, assets, liabilities, and income.
Automated Findings on Automated Underwriting System
The automated underwriting system is like a brain and considers every aspect of the mortgage loan applicant.
An automated Underwriting System analyzes the following in a matter of seconds:
- Credit scores
- Past delinquencies
- Bankruptcy if any
- Foreclosures, if any, tax liens, if any
- Payment history, late payments
- Charge-offs, if any
- Debt to income ratio, judgments
- Payment plans
- Forbearance
- Employment history
Assets, liabilities. Other factors are taken into consideration by AUS before issuing automated approval. The automated underwriting system will be more selective in approving those who have had a prior deed-in-lieu of foreclosure or short sale right after the 4-year mark. Chances of approval might be greater as more time elapses.
Approve/Eligible Per Automated Findings
The lender will only approve a mortgage loan to borrowers four years after a deed-in-lieu of foreclosure or short sale. Approved/eligible findings from the automated underwriting system are required. Although borrowers have exceptional credit, assets, and income, they still need an approved/eligible from the Fannie Mae automated underwriting system. Another option borrowers might have is to have a lender who is willing to do a manual underwrite, which not many will do manually underwriting on conventional loans.
Other Factors
I strongly recommend that home buyers not enter into a real estate purchase contract on a home until they wait out the 4 years. I have seen too many cases where home buyers get antsy. They enter into purchase contracts before the 4-year waiting period and stress out. Can it be done? Of course, but there is no guarantee.
Update on Conventional Mortgage After Short Sale and Deed-In-Lieu
The two-year mandatory waiting period after a deed-in-lieu of foreclosure or short sale with a 20% down payment on a home purchase is no longer in effect.
Fannie Mae and Freddie Mac extended the waiting period to qualify for a conventional loan after a deed-in-lieu of foreclosure and short sale to a four-year waiting period with a minimum of 5% down payment.
Mortgage loan applicants with any questions on the waiting period after a deed-in-lieu of foreclosure or short sale, please get in touch with us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Our email at Gustan Cho Associates is gcho@gustancho.com.
