If you’ve been in the unfortunate position of being on the Selling side of a Short Sale – our hearts go out to you. We are sure it was a difficult decision to make, but now that it’s behind you – maybe you’re ready to buy a new house in North Carolina?
We had a call this morning from a guy who left Florida in February of 2010, and came to Raleigh, North Carolina with a new job. The family is now settled, they love the area, and he called with this question.
Can I Buy A Home After A Short Sale With The USDA Home Loan Program?
There are some important features to the way a USDA Loan Underwriter will look at your mortgage application that differ from other mortgage loan programs. Because the USDA Home Loan program does not require a down payment – it’s inherently more risky than other programs, like FHA, and the credit underwriting for the program is more conservative as a result.
The USDA Loan waiting period after a Short Sale is 36 months from the date of transfer. I’ve looked online, and I’ve found forum comments on Zillow and Trulia that state you can get a USDA Loan with a shorter waiting period… but in North Carolina, the USDA Loan Underwriters will generally NOT approve a loan with less than 3 years from the date the title transferred. So for the guy this morning – the Short Sale was in February of 2010 – and we are well past the 36 month period.
Having said that… here’s the reason there are some conflicting reports about using the USDA Loan Program to buy a home after a Short Sale.
Many of the Homeowner’s we’ve talked to had a long, difficult short sale process. Unfortunately, the laws for Foreclosures and Short Sales and Evictions vary greatly from one state to another. Because of this, Banks do not have a “standard” guideline for reporting Short Sales on your credit report.
So, when you ask us if you can buy a home after a short sale with the USDA Home Loan Program – the answer is that we won’t really know until we pull your credit report.
Frankly, depending on the Bank you had your other mortgage with – they might report it as a Short Sale, and they might not. The Bank may have reported it to the IRS as a short sale… or maybe not – so it depends on how the other Bank is reporting the transfer that determines how long you have to wait to get a USDA Loan. We will be required to pull your Tax Return Transcripts, so it might not show on the Credit Report – but show up in the IRS Transcripts.
In some states there will be a deed in lieu of foreclosure in connection with the Short Sale, and that will viewed with the same 3 year restriction. If you have very high credit scores – and a VERY GOOD “reason” for the Short Sale – there’s some wiggle room for a USDA Underwriter to cut the wait to 18 months to 2 years.
It’s important to understand when we say that a USDA Underwriter has the ability to approve something – that we are talking about that one in a 1,000 case. The step in the approval process, is getting through the Automated Underwriting System called GUS. Depending on how the Bank showed the sale – this might be pretty easy. The USDA Loan actually goes to our Bank Underwriter, and then goes directly to the USDA Rural Development Office for an Underwriter there to physically look over.
That’s not the only thing you need to have nailed down – USDA Guidelines also state that any debts written off in the last 36 months are considered unacceptable credit – so if you had a Bankruptcy, you’ll have to wait 3 years as well.
Generally, you will need a 640 credit score, no late payments in the past 12 months, no new collections added to your credit report in the past 12 months and some open credit that is in good standing in order to get a USDA Home Loan in North Carolina.
Have more questions about Can I Buy A Home After A Short Sale With The USDA Home Loan Program? Leave us a comment below, or call Steve and Eleanor Thorne 919 649 5058 – we’d love to help you get into a home before the USDA Loan Eligibility Maps change on . Connect with us on Facebook or Find us on Google +
Q: We own a home in Durham that is now a rental property (been renting it out for over a year now). We are looking for homes in Southern Wake / Northern Johnston counties and are wondering if we could be eligible to receive a USDA Loan. The rental property mortage is FHA loan.
Steve! Thanks for asking – we can help you with that! The rule on a second home is “50 miles.” So the old home must be more than 50 miles from your job. If that’s the case – then your NEW home must ALSO be 50 miles away from your OLD home. Please call us, we’d love to go over your exact situation 919 649 5058
I am interested in purchasing a house again (in Florida). I had a short sale one year ago but it wasn’t considered a “True” short sale because the balance of the house was paid in full. USDA was not shorted any money. But because my payments were over 120 days late, it is considered a short sale. My payments were late due to financial struggles, completely all my fault. My “Middle” credit score is a 756, I have no outstanding payments, everything is in good standing, I have been renting for the past 11 months with no late payments. But my loan officer says no way, no how will USDA approve me again. Is this true? Are there any loop wholes that can be arranged? I know it’s my fault for being in this situation but I want to own a home again, because I can now afford to do so.
Amy – I haven’t seen your credit report (obviously) but if it shows as a Short Sale, then USDA is pretty firm on the waiting period. A FHA Home Loan might be an easier loan – I’d have to see the credit report. I have a friend who is a great loan officer in Florida. His name is Gerry Suarez, his number is 352-516-9884. Ask the loan officer who looked at your report to send you a copy of it. Then contact Gerry, and let him give you some options. That way, you won’t have a ton of inquiries on your credit report… I get the 120 days late – it just doesn’t sound like it should be coded as a Short Sale? I would get a second opinion. If you get the report, and you want me to look at it, I’ll be glad to. You can call me at 919 649 5057.
Thanks! I spoke with another loan officer who is Vice President of a bank here in FLorida, and he actually ran my credit report and emailed it to me, since my original loan officer (In Ohio) will not send me the credit report. He (Florida officer) doesn’t understand what is going on either. My credit report shows numerous times of my account being over 120 days, which is why I needed to short sale. It got to where USDA kept sending my payments back because I wasn’t fulfilling the whole back amount that was due, so obviously it will definitely be 120 days late. My credit report does not show it as a Short Sale, just the many payments over 120 days. It also says Paid. The Ohio loan officer said that it is federal regulations that if I have a payment over 120 days, then it goes into short sale status with them.
I don’t know the LO in Ohio – but I’ve seen plenty of credit reports that didn’t show it as a Short Sale… that’s what this whole page says. HIS Credit Reporting Bureau may code it as a Short Sale – but if it’s not actually shown that way by the Bank that held the note, then there’s room for it to be looked at differently. If it’s paid, and you are 12 months beyond the date of the sale, you should be able to apply for a FHA loan. It does require a 3.5% down payment. USDA is a tougher loan to get, simply because there are no down payment requirements. USDA Underwriters will generally rubber stamp whatever the Bank’s Underwriter approves.
Would you mind if I called you? Possibly email my credit report info?
That’s fine – my land line is 919 459 1307 / email is eleaVor at Gmail.com
Spot on info as always Eleanor! Thanks for the recommendation and I will do my best to help Amy when she contacts me. It does sound interesting and I’m curious to see what her credit report and the records of the sale show.
Keep up the great write ups- you do consumers such an excellent service providing this info and don’t get thanked as much as you should!
Eleanor,
Can you please recommend a loan officer in southern Ohio. We wen through a short sale a year ago, because of extenuating circumstances.
Thanks,
Cynthia
Robert Verne is with Academy Mortgage in Cincinnati. I just talked to him, and he specializes in Government Lending – which is probably going to be the best mortgage program for you. Congratulations Cynthia on getting into a better situation, and being ready to buy another home! His number is (513) 214-3811, his website is http://www.academymortgage.com/lo/robertverne#.U5dSz3aKlkc
I have been divorced for 4 years now. And the home went into forclosure due to my ex-wife refusing to refinace or selling the home or making any payments on the home. Me and my new wife are wanting to purchase a home, but not sure if we can qualify for a USDA loan. The divorce to a big toll upon my finances, but I am making a rebound. I do not know how the forclosure will show up on my credit, but they did sale the home, but I’m not sure if they sold it for the amount owed. What are my chances of getting a USDA loan. And if not, could my new wife (3 years) apply as the primary?
Eddie – I know that was a tough time – glad it’s behind you! Yes, your wife can apply for the loan, and we CAN pull your credit report and let you know what might be on there. That’s really the best thing to do. Are you buying in NC? If so, call me at 919 649 5057 (this is MY cell number) or you can hit apply on the site in the top of the site. If you are looking for a home outside NC, I can refer you to someone 🙂