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When can I purchase a home again after doing a short sale?

This question is becoming increasingly popular from past and future clients as 2012 comes to a close.  The answer to the question depends on what type of new loan and home you are seeking when you decide to purchase again.  If you are looking to purchase a primary residence and plan on putting less than 20% down, then the answer is three years.  As long as three years have passed since the completion of your short sale and your credit score is back above a 640 then you can potentially obtain an FHA loan on a primary residence and put as little as 3.5% down.  It is no surprise that people who had a short sale are now starting to resurface given the fact that 2009 was a record year for short sales.  Some are more cautious this time around when it comes to their purchase price point but who can blame them for stepping back into the purchase arena?  With rates on a 30yr Fixed FHA loan hovering in the low 3% range, most of them find that it is currently cheaper to own then to rent.  I actually just completed an FHA purchase loan for a client who had a short sale in August of 2009.  She had a 680 score and put down 5%.  It took us less than 30 days to close her loan and her total housing payment was $250 less than what she was paying in rent.

If you plan on putting more than 20% down and are seeking a conventional loan for the purchase of a primary, second home or investment property then the time frame is a little longer and you could find yourself waiting 4-7 years after a short sale before you can purchase again.  Fannie Mae and Freddie Mac require a minimum of four years before becoming eligible to purchase again.  However,  these two mortgage giants have said that, in some cases, it could be as long as seven years.  Fannie and Freddie both run and approve loans through an automated underwriting engine. (DU for Fannie and LP for Freddie). These underwriting engines take a lot of things into consideration when making a decision to approve a borrower such as credit score, down payment and debt to income ratio.  Having a short sale on credit is definitely a derogatory item so a borrower would need good compensating factors to make up for the blemish.  Some compensating factors that may contribute to a loan approval in spite of the past short sale would be a high credit score, a large down payment, strong assets or a low debt to income ratio.  The more compensating factors one has than the more likely the loan will be approved.  Since short sales became popular at the end of 2008 and into 2009, we are now approaching the time frame where borrowers can possibly begin purchasing again with conventional financing.  My advice to you is, if it has been four years and you have re-established your credit, then it is definitely worth taking a look to see if you would qualify for a conventional loan.  With rates at record lows, it’s a great time to be a homeowner again!

To learn more about our company and mortgage products, please feel free to call Dan Longman, President of Priority Lending Corp, at 954-438-3776 ext.11 or email me at prioritydan@bellsouth.net. Please visit www.prioritylendingcorp.com

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