The Smooth Loan Process #2010-24

Buying A Home After A Short Sale

Remember playing the post office game in grade school? The first person whispers something in the ear of the person next to him. The next person repeats what the first person said and so on. By the time the phrase gets to the last person in the game, it's completely different from what the first person said. Click the link for my favorite example of this from The Simpsons. http://bit.ly/5kBggd

The post office game is being played when it comes to HUD's guidelines on purchasing after a short sale. I've heard everything from one end of the spectrum to the other. This morning, KTAR reported "good news for all that have had a short sale."

Here are the facts. You can check it out on HUD's website. http://bit.ly/mortgagee09-52 . In order to be eligible to purchase a home with an FHA loan after a short sale, you must have been current on the mortgage for the 12 months prior to the short sale. The rest of your credit must meet FHA standards. The new home must not be within a reasonable commuting distance from the property that was sold. That last bit is the kicker. Essentially, It means that reason for your short sale must be because you were relocated by your company to a different metro area. It's not HUD's intention to reward people for short selling a property to improve their equity position.

There are also provisions for drastic increase or decrease in family size.

Unless you have been relocated to another city by your employer, or you are the Octo-mom, your short sale is going to be treated very similarly to a foreclosure when it comes time to purchase the next home. For FHA loans, that means three years from the date of the short sale.

The Smooth Loan Process lesson for today: It is very unlikely that you will qualify to purchase a home within three years of a short sale.

Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com