Wednesday, April 18, 2012

How long until I can get another loan after a Shortsale or Foreclosure?

I get asked this question frequently. Many people today have been faced with tough decisions related to their primary residence. Some people are trying to decide what to do upon facing financial difficulties arising from unemployment or ballooning interest rates. It is important when faced with these decisions to understand the ramifications of choosing to short sell or foreclose upon your home.

First of all, let me say that you need to get help from professional sources before you ever decide to go down one of these routes. Make sure you have all the facts in front of you before making any decision. A realtor can appraise your property accurately and give you an overview of what to expect in the event of a short sale. A real estate attorney can advise you on whether there are any legal issues in your specific situation. A financial advisor can help you cover the potential economic ramifications and finally your accountant can make sure you have covered the tax implications. OK so now you are ready to move forward. Here is the bottom line as regards how long the credit hit will keep you out of the market (** this is an estimate only at time of publication based on current market data).

Short selling your house will keep you from the market for the least amount of time.

Fannie Mae - 2 years with a LTV of 80% 4 years for an LTV of 90%
FHA           - 3 Years from completion date
VA             - No specifics on this yet, assume foreclosure rule of 2 years
Jumbo        - 7 Years from Trust Deed Date

Foreclosure will lead to the following waiting periods.

Fannie Mae - 7 years from Trust Deed Date
FHA           - 3 years from Trust Deed Date
VA             - 2 years from Trust Deed Date
Jumbo        - 7 years from Trust Deed Date

These are guidelines only and everyones credit will be impacted in a different way based upon where they were before and how well they behave financially after the event.

Remember as much as 60% of all transactions right now are distressed, meaning they are either short sales or bank owned properties. These transactions are the signs of a very specific period of our economic history.

If you have questions or concerns related to any of the subject matter in this blog, please feel free to call me any time for a free and confidential consultation.


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