Over the last six years, short sale, deed in lieu of foreclosure and loan modification became common terms in the world of residential real estate. According to the Orlando Regional Realtor Association, in March of 2011, distressed properties accounted for over 75% of all home sales, however the most recent market pulse released from ORRA states that the number of distressed sales has declined to just under half of all transactions in March of this year.
As the market continues to recover and interest rates still at historic lows, many people that went through foreclosures, short sales, loan modifications or a deed-in-lieu in the last few years are wondering if they can purchase another home and what the guidelines will be when it comes to them obtaining another mortgage.
I reached out to my preferred lender, Maggie Ambruster with Embrace Home Loans, and this is what she said:
In order to obtain a conventional loan:
- After a foreclosure you must wait 7 years.
- After a loan modification, short sale, deed-in-lieu with the following restrictions:
- There are no restrictions once you get to 7 years past the event
- 80% loan to value with 2 years since the event*. ( 20% down payment)
- 90% loan to value with 4 years since the event. (10% down payment)
In order to obtain an FHA loan (3.5 % down payment):
- After a foreclosures or deed-in-lieu:
- It must be 3 years from the deed transfer date.
- After a short sale:
- Allowed if current on payments for 12 months prior to the sale from application date on new loan and not taking advantage of declining market conditions/purchasing superior property within reasonable commuting distance at a reduced price.
- If the borrower was in default they must wait 3 years from the deed transfer date.
- Post loan modification:
- Allowed for full credit qualifying rate and term and cash-out with payment history of 0x30 for the last 12 months.
- Allowed for streamline approval.
- Documentation or trade line update required to confirm the modification date was at least 24 months ago.
Requirements for VA loans:
- Post loan modifications:
- No restrictions or seasoning apply.
- Borrower must meet all other credit and housing payment history requirements.
- After a foreclosure or deed-in-lieu:
- 2 years from the deed transfer date.
- After a short sale:
- Allowed if the borrower was current on the mortgage and installment debt for 12 months prior to the sale from application date on new loan or 2 years from deed transfer date if the borrower was in default on mortgage at the time of the sale.
The good news for home buyers is that it is possible to obtain a loan after going through what for many was a devastating loss.