Don’t Let a Short Sale Keep You From a New Mortgage

If you negotiated a short sale of your home, you may be surprised to learn that some mortgage loan underwriting systems can’t distinguish short sales from foreclosures on consumer reports. And that may keep or delay you from getting a new mortgage.

You see, borrowers who go through a foreclosure typically have to wait seven years before they’re eligible for a new mortgage. But short sellers may qualify in as little as two years. When you’re trying to buy a new home, an additional five years can seem like a lifetime. So is there anything you can do to improve your financial footing? You bet there is.

  • Get a letter from your lender confirming that your loan closed in a short sale, not a foreclosure. Send a copy of the letter to each of the nationwide credit reporting companies: Equifax, Experian, and TransUnion.
  • Order a copy of your credit report. Make sure the information is accurate. If you find a mistake, contact the credit reporting company and business providing the information to correct the error.
  • When you’re ready to buy another home, get pre-approved for a loan. A pre-approval letter from a lender shows that you are able to go through with a purchase. Pre-approval is not a final loan commitment; it means you met with a loan officer, your credit report was reviewed, and the lender believes you can qualify for a specific loan amount. This pre-approval process allows your lender to identify issues and errors in your credit report that may keep you from qualifying for a loan. That, in turn, allows you to correct inaccuracies before they can prevent you from buying another home.

Comments

It seems to me that foreclosure, short sale, deed in lieu, cash for keys all mean the lender probably lost money so there is a negative connotation – Its my understanding all of those things get reported simply as “foreclosures” on credit reports. is there a new regulation on this? It would be helpful for me to know this since I help people prepare to get a mortgage.

There is currently no difference in the waiting time between a short sale and foreclosure until a new mortgage according to our underwriter. Per one of the mortgage lenders here at the University of Michigan Credit Union. Kathryn Greiner

Is there a difference in the way reporting is done by state? I did a 'short sale' on my home back in 2010 and it shows as a completed loan on my credit report. Why is there a difference from state to state, and why are lenders not required to show this status on the reports they file? Considering all the 'issues' with lenders and their bad habits, it would seem that this should be a requirement. My lender was shut down by the FBI for 'ponzi' schemes and the company was shut down. This left my mortgage in limbo for 8 months, during which time my payments were not recorded so it shows that they were not made. This has hurt my credit, and caused numerous problems for me, and led to the 'short sale' of my home when the new 'assigned' lender chose to list me as a foreclosure. Where did my money end up? Anyone's guess at this point.

Both a short sale and a foreclosure will impact your credit score essentially the same- a loss of 100 to 300 points. Still, many say that a foreclosure will hit your credit harder than a short sale with late payments- each seller situation varies. If you have a great credit score when either happen, you will be most affected and take the longest to recover. If you already didn't have a great credit score, you may only suffer a loss of 100 points or so. Someone that has had a short sale can expect to wait at least 2 years for a decent interest rate on an institutional mortgage loan, although negative credit will show on your credit report for 7 years. With foreclosures, it will take at least 5 years, but probably closer to 7 years, to obtain a new mortgage loan. ~Christina, Current Mortgage Rates Today

Banks and lenders have discovered they can get away with about anything. No one goes to jail,
the lender gets off with a slap in the wrist, same with collectors, they get a fine, cost of doing business, then business as the mob usual.

Did I say mob in my last post? Ok I'm sorry I should have said organized crime. Now they are calling the crimes by Chase, Bank America, Wells Fargo and others errors. Try to go into a bank and make an error..you can kiss it all goodby

The problem I am running into with a lot of mortgage applicants is that the new FHA, Fannie Mae Guidelines call for a 0x30 mortgage history on the home that was short-sold, and in reality, most people are not 0x30 on the home before the short sale takes place. This is holding a lot of deals up from closing in my opinion.

So what is a couple who lives Social Security Disability, each one of us,+ one has an extra retirement check from the State of Wa, this is all tax free $$. I also have an annuity from my ex +a good part of his retirement coming when he retires. I have enough in my portfolio to put down a good down payment,I want to be able to put down enough so I can afford the mortgage on my own if necessary. We are also thinking of renting 1st to find out if we like the particular area were living in since it's a new area. We'd like to go after the 12th to look around with a translator, rent w/option is also a possibility although I know I must really find out where the owner is sitting with the mortgage. I guess I want to know if it's too soon to call a realtor,as we'd like to move in Oct. Thank you!

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