How a Previous Short Sale Can Determine Credit Availability

Nations Lending’s originators are sometimes asked, “We had a short sale several years ago, can we obtain a loan to buy a home?” The short answer is yes, although there are some requirements that need to be understood. It is easy to understand why a borrower that has defaulted, or had a short sale, is perceived as more likely to do it again.

There are different waiting periods for different types of loans. For example, Fannie Mae & Freddie Mac (aka “conventional”) require 4 years plus one day from the date of sale of the short sale. FHA’s rule is 3 years plus one day from the date of sale of the short sale. For VA eligible borrowers, the waiting period is 12 months plus one day from the date of sale of the short sale. It is important to note that Investors periodically change the requirements for qualifying.

The waiting period impacts you on not only when you can be approved for a new mortgage but also when you can purchase a home. The purchase contract for your new loan must be dated either 3 or 4 years plus one day from the short sale close date.

For example, you had a short sale on your previous home with a recorded deed that shows it closed on June 1, 2012. You wish to purchase a new home. You write an offer to the seller on June 1, 2016 and it is accepted—the lender will reject it. Why? You waited the required 4 years (conventional example) but you did not also factor in the +1 day. If you write an offer, however, to a seller on June 2, 2016 and it is accepted, you have met the requirement of the 4 years and 1 day, therefore the lender will accept the purchase contract as valid as well.

Keep in mind that all other qualifying guidelines for credit, income, assets, etc. for the loan program for which you are applying must also be met. And certainly talk to your Nations Lending Mortgage Advisor for more information!