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Wednesday, April 20, 2011

How To Get A Loan After A Short Sale Or Foreclosure

What are the absolute bare-minimum * guidelines * to obtain a mortgage?
….and perhaps more interesting…how to obtain a mortgage soon after a Short on…
By far the easiest mortgage to obtain is a FHA loan:
1) 3.5 percent down payment, based on the purchase price of the home (e.g., $7,000 on a $200,000 home), or a gift of that same amount;
2) 3 percent to 6 percent of the purchase price, on top of the down payment, for closing costs, or a credit from the seller of the same amount; and
3) 640 FICO credit score — the middle score of those generated by the three credit bureaus (some banks will lend to borrowers with middle scores lower than 640, but will require more than the minimum down payment).
Lenders will want you to document income, asset and job history documentation, current paycheck stubs, two months’ bank statements and two years of W-2 forms or tax returns, and:
  • a minimum of two years have passed since the discharge of a bankruptcy;
  • a minimum of three years have passed since a foreclosure;
  • anywhere from zero to three years have passed since a short sale, depending on the circumstances surrounding the short sale.
As a professional can tell you it would have to be an awfully good reason for the consumer to have done a short sale to get the underwriter to sign off on it. Something like being transferred to a job in a different area, and not being able to rent the home out because it wouldn't pencil. You would need to deal with an experienced mortgage professional who was licensed, and has the knowledge of how to document what happened. We used to call FHA loans, "tell the story of what happened loans." An Underwriter has the ability to sign off and approve the loan if it meets certain very stringent guidelines. That said, the problem we are all having these days is "investor overlays." That's when the investor that purchases the loans lays their guidelines over, or in addition to HUD's.

Additional info on the statement “depending on the circumstances”… are a couple.
1.) Short sold home must have had 0 Late payments in the previous 12 months.
2.) Borrower must have proof of severe circumstance (ie. death of spouse who was previous joint borrower / income earner to pay previous short sale mortgage, forced job transfer to a different state or “significant distance” to remain employed, etc.

*Information culled from various sources. Please always contact a professional to get the most current information.
If you have any questions please contact Gary Tippner!
So, give me call at 1-877-311-GARY or visit my site at

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