If you’ve gone through a pre-foreclosure (short sale) and are thinking of becoming a homeowner again, it’s important to know about the fast-approaching changes announced by Fannie Mae. As of August 16th, 2014, the waiting period for a new home purchase after a pre-foreclosure or deed in lieu of sale, will be changed from 2 years, to 4 years.
While this may seem like a setback for homeowners who have gone through a short sale or deed in lieu of foreclosure, there is good news. The homeowner will be able to follow standard Fannie Mae guidelines and put as little as 5% down toward the purchase of a new home, as opposed to the current guidelines, that require 20% down for those who have experienced a short sale or deed in lieu of foreclosure.
The 4 year waiting period may be reduced to the current 2 year wait if a homeowner can prove extenuating circumstances. For example: the loss of employment and/or wages as the cause of the short sale or deed in lieu of foreclosure. However, in order for the 2 year wait to be considered, strong documentation must be provided by the homeowner.
November 16th, 2014 will also bring changes to new loans run through Fannie Mae’s automated underwriting system.
1. No more 3% down purchases.
2. Treatment of short sale & deed-in-lieu of foreclosure reporting by creditors has been clarified.
3. Borrower’s who are doing the DU Refi+ (Making Home Affordable) refinance program and have had a prior bankruptcy, foreclosure, deed-in-lieu of foreclosure, or pre foreclosure sale will no longer have to abide by the standard waiting period requirements.
All the specifics and fine print can be found at here at FannieMae.com.
As always, it’s best to consult with a licensed mortgage lender to fully understand how these change may impact you.