Home buyers with a short sale in their past can now purchase a home with a mortgage and no, the terms are not dreadful nor are the down payments outrageous. In fact, there are a number of programs to assist prospective home buyers re-enter the Charlotte housing market.
Think about it: last year and the year prior, hundreds of thousands of homeowners refinanced to ultra low 3.5-4.5% interest rates and others purchased as well. Unfortunately for mortgage banks, once a homeowner refinances or purchases at an unbelievably low rate, they’re effectively out of the market until they need to sell and move on. After all, no one in their right mind would forego a 3.5% interest rate for a 5% unless life changed. So now the next target audience is to bring buyers that have had a short sale back in the housing market.
There are a few things to keep in mind. First, your credit has to be in good standing currently. If you were late on your mortgage payments but managed to keep everything else current since, your credit score has likely rebounded from the short sale. Ideally, a score in the 700’s or higher will give you the most options however the FHA will consider a loan under 700.
A down payment will be necessary however the percentage required varies by the loan type.
Next, the date of when your short sale closed is critical. Some investors will consider borrowers whose short sale closed 2 years prior while others will expect a longer period. This is an interview question for your mortgage loan officer. It is CRITICAL that the lender is 100% familiar with their investor’s underwriting guidelines (whomever they are selling your loan to) so that a last minute stipulation doesn’t kill your transaction and cost you thousands of dollars. Have a copy of the HUD-1 from your closed sale at the ready.
Finally, some lenders will want to know the reason why you went through a short sale. In my experience, the typical short sale client’s hardship was centered around a loss in the family (death), divorce, documented loss of income, or some other serious malady. If your hardship was that you spend your second line of credit on a new BMW and a boat, don’t count on purchasing a home for awhile.
Good communication is key from between you and your new lender. You will want to work with someone who has closed other clients with short sales in their past since they will likely know the routine better than someone experiencing trying to get their first client approved. Honesty is key. Trying to hide something in the hopes that it will go through is a very risky decision that almost never works and usually ends catastrophically poor.
At the end of the day, this is a win-win for everyone. For the client, they’re able to purchase a home still for less than the cost of rent. For the lender, they’re getting a client back on solid ground and typically in a better financing situation than before. For the economy, more buyers will help to drive demand and absorb available inventory.
Our team is happy to provide referrals to excellent lenders that have experience with working with client’s with a short sale in their past.