A Foreclosure & How It Affects You Buying Another Home

Here is how you are affected when doing either a short sale or foreclosure.  A short sale is always going to be better than a foreclosure.

On a Conventional loan with Financial Mismanagement it is as follows:

  • Foreclosure – 7 years
  • Deed-in-Lieu of Forecloure/Short Sale/Pre-Foreclosure is 2 years with a minimum of 20% down.
  • Deed-in-Lieu of Forecloure/Short Sale/Pre-Foreclosure is 4- 7 years with a minimum of 100% down.

If you can show an extenuating circumstance than all of the above goes to:

  • Foreclosure – 3 years and up to 7 years with 10% down
  • Deed-in-Lieu of Forecloure/Short Sale/Pre-Foreclosure is 2 years with a minimum of 10% down.

Fannie Mae defines a unique hard ship as:

  • is unlikely to re-occur and is not a natural or manmade disaster;
  • is temporary in nature or of limited scope, but impacts many borrowers;
  • may involve property damage, hazard in the dwelling, or other adverse property conditions;
  • creates financial hardship that impacts the ability of the borrower to continue making payments on the mortgage loan;
  • may involve uncertainty regarding whether insurance will cover the losses incurred; and
  • has been designated as a “unique hardship” by Fannie Mae.

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/svc1011.pdf 

FHA requires 3 years and VA is 2 years.  FHA & VA does have a short sale waiver, see attached on pages 4-5.   There are exceptions to a short sale on an FHA or VA loan, Short Sale Policy Waiver.

The years and guidelines mentioned above are subject to change without notice and can vary from bank to bank.