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Can You Obtain a Home Loan If you Did a Short Sale or Deed-in-Lieu?

Dennis Norman

In an effort to “support overall market stability and reinforce the importance of borrowers working with their lenders when they have difficulty paying their mortgages”, Fannie Mae has eased their policies with regard to the eligibility of borrowers to obtain a new mortgage loan after having a short-sale or deed-in-lieu of foreclosure.  The “waiting period” that someone must wait before getting a new mortgage after a short-sale or deed-in-lieu has been shortened in certain situations.

Changes to the Waiting Period After a Short-Sale or Deed-in-Lieu of Foreclosure:

  • Deed-In-Lieu of Foreclosure
    • Current waiting period – 4 years with additional requirements after 4 years for up to 7 years
    • New waiting period – 2 years for 80 percent LTV (loan to value) mortage, 4 years for 90 percent LTV and 7 years for higher LTV’s
  • Short-Sale
    • Current waiting period – 2 years
    • New waiting period – 2 years for 80 percent LTV (loan to value) mortage, 4 years for 90 percent LTV and 7 years for higher LTV’s

If you had “extenuating circumstances” that caused the need for the short-sale or deed-in-lieu there are different guidelines for your waiting period and Fannie Mae has made changes to them as follows:

  • Deed-In-Lieu of Foreclosure
    • Current waiting period – 2 years with additional requirements after 2 years for up to 7 years
    • New waiting period – 2 years for 00 percent LTV (loan to value) mortage.
  • Short-Sale
    • Current waiting period – same as above, no exceptions currently.
    • New waiting period – 2 years for 90 percent LTV (loan to value) mortage.

I would say most borrowers that have had to do short-sales and deeds-in-lieu have had extenuating circumstances that caused it, so these changes I would think give them some hope.  With a ten percent down payment they can obtain a mortgage again as soon as two years…maybe by then the market will be looking a little better.

 

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