How do you get a home loan after a short sale?

Answer 1

Fannie Mae reducing wait for home loan after short sale

WASHINGTON - Here's some good news for people who have had to give the deed on their house back to the bank or who have done a short sale: You may not have to wait the typical four or five years to requalify for home financing.

In fact, your wait may be as little as two years. In a bulletin to lenders April 14, mortgage giant Fannie Mae said it is relaxing rules that prevented loan applicants who participated in short sales or deeds in lieu of foreclosure from obtaining a new mortgage for extended periods of time. The new rules are scheduled to take effect July 1.

Though Fannie Mae officials declined to discuss the reasoning behind the changes, the bulletin to lenders said the company hopes to encourage troubled borrowers to work out solutions that avoid the heavy costs of foreclosure.

Fannie's new standards come with some noteworthy fine print, however. To qualify for a new loan in the minimum two years, most borrowers will need to come up with down payments of at least 20 percent. If they can only scrape together 10 percent, the mandatory wait will revert to the four-year minimum. And if their down payments are less than 10 percent, the wait could be even longer.

On the other hand, if borrowers can demonstrate that their mortgage problems were directly attributable to "extenuating circumstances" - such as loss of employment or medical expenses - they may be able to qualify for new loans with a minimum 10 percent down payment in just two years