How to Get Financing After You Go Through a Short Sale
Ever since the real estate bubble burst, short sales have become more and more frequent. A short sale occurs when a person attempts to sell his home and pay back less than is owed, while being forgiven for the deficiency. But while a short sale doesn't destroy your ability to purchase a home again the way a foreclosure does, it still hurts.
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Instructions
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Each situation is different
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Evaluate your situation to determine how the the short sale went. Unfortunately, there isn't a set way to go about financing a home after a short sale; it really depends on the homeowner. If the homeowner has a history of on-time payments prior to the short sale, and if the sale was negotiated fairly quickly, the lender may not report it as negatively to the credit bureaus. Most people, however, have had a string of late payments before reaching the decision to sell, and this is where the credit damage really occurs.
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Meet with a reputable mortgage expert who can review your credit report with you to determine how you can proceed. If your payment history and credit report is poor enough, it will be considered equivalent to a foreclosure or bankruptcy, and investors may require anywhere from 2 to 4 years before you can apply for financing.
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Determine if there are extenuating circumstances that created your inability to pay the debt. If extenuating circumstances exist, you could be able to purchase a home, but most likely, there will still be a waiting period of a year or more following the short sale. Time amounts can vary with circumstance and lender.
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Check your credit score to see if you meet the credit score requirements. For a conventional loan, it will depend on your down payment. For an FHA loan, most lenders require a score of 620, but some will go lower with a higher interest rate.
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Tips & Warnings
In today's lending environment, investors are changing their guidelines daily and not all lenders/brokers have access to the same programs. If you are contemplating any move regarding real estate, your first call should be to a seasoned financing professional.
