Let’s face it, we all know someone in Las Vegas who lost their home to a short sale or foreclosure. And let’s note that it was their “home” and not just a house!
The most recent numbers show that there are somewhere around 28,000 homeowners in our valley who have not made a mortgage payment for at least 90 days. Some folks have not made a payment for years.
I thought it would be a good idea to recap what financing options are available to purchase a home after a short sale or foreclosure. There are options to purchase immediately “one day after” using private money or portfolio financing… and “waiting periods” to qualify for a traditional loan.
- Private Money Financing – is available as little as one day after a short sale or foreclosure. This financing normally requires a minimum 25% down payment. Interest rates will range around 4%-5% higher than traditional loans. Loan fees will run between 3%-4% origination fee. This type of financing is ideal if there is no prepayment penalty as it allows you to own your own home again now, while prices are still attractive, and then refinance as soon as you can qualify for a traditional loan.
- VA Financing – if you are eligible for a VA loan, you can purchase two years after a short sale or a foreclosure.
- FHA Financing – the FHA program becomes available three years after a short sale or foreclosure. But note that the current maximum FHA loan amount in Clark County, Nevada is $287,500. So your purchase choices may be a little bit limited.
- Conventional Financing – when using conforming conventional financing (loan amount $417,000 or less), there is a big time wait difference between if you had a short sale or a foreclosure.
- * Short Sale – you will need to wait four years after the short sale event before you can qualify. But the good news is… you can buy a new home with as little as 5% down payment at that time!
- * Foreclosure – it will be seven years after the event before you can obtain a conventional loan. Regardless of how much you are putting down.
- Jumbo Financing – this is for loan amounts above the conforming limit of $417,000. Similar to conventional financing, there is a wait difference between a short sale and a foreclosure. A short sale wait is typically five years while a foreclosure wait period is typically seven years. Note that if you have an established “banking relationship,” some banks may provide Jumbo portfolio financing without the extended wait times.
Some things to remember! The “date” which starts the “wait time clock” is the day that the house title is transferred out of your name. And when applying for the loan to purchase your ‘new home,’ all standard qualifying conditions still apply. It’s not just the wait – you still need to qualify.
Working with a lender who has lots of experience in nontraditional, “2nd Chance” financing can go a long way in getting your transactions closed. As they say, “if you don’t know the road ahead, ask someone who has traveled it.”