Good news for people who have given the deed on their house to the bank because of financial problems, or done a short sale to avoid foreclosure: You may not have to wait 4 to 5 years to requalify for financing to buy a home.
It could be as little as 2 years. FNMA issued a bulletin to lenders April 14, saying it is relaxing the previous rules that prevented loan applicants who had participated in short sales or deeds in lieu of foreclosure from obtaining a new mortgage for extended periods of time. The new rules are scheduled to take effect July 1.
Homeowners who've done short sales — such as under the Obama administration's new Home Affordable Foreclosure Alternatives program — will also be able to qualify for a mortgage in as little as two years.
The fine print: To qualify for a new loan in the minimum two years, most of these borrowers will need to come up with down payments of at least 20%.
However, if borrowers can demonstrate that their mortgage problems were directly attributable to "extenuating circumstances" — such as loss of employment, medical expenses or divorce — they may be able to qualify for new loans with minimum 10% down payments in just two years.
The main potential complication is in FNMA's credit rehabilitation requirements. To qualify for a new mortgage, FNMA expects borrowers to reestablish their credit enough to get passing grades from the company's automated underwriting system, which considers credit bureau data among other factors.
Source: Kenneth Harney, Washington Post Writers Group 4/25/2010