Short Sale? No Problem – Here is Your New Loan!
Wrong! It’s not that easy, especially if you held back funds while the bank permitted the sale of your property for less than the mortgage. You can’t stiff the lender and then think the next creditor will just turn a blind eye (Obvious Red Flag Alert: Experiencing a short sale, foreclosure or bankruptcy but miraculously still having a 25% down payment right afterwards).
Not only do you need to evidence your “Ability to Repay”, but you also must demonstrate fiscal responsibility. In order for a lender to sell your mortgage to an investor – usually FNMA (Federal National Mortgage Association), your short sale/bankruptcy must have been concluded at least two (2) years prior to obtaining a new loan.
There are plenty of “portfolio lenders” who can help bridge you through the seasoning period (i.e., lenders electing to hold your loan on their books – rather than selling to FNMA). However, in exchange for taking the risk that you just might revert to how you treated your former creditor, the new lender will assess an interest rate that will most certainly NOT be at the current attractive conventional or FHA levels.
These “Non-Agency” lenders have different programs:
- some charge upfront fees of 1, 2 or 3% of your loan,
- others have no fees but have a declining scale prepayment penalty schedule,
- pricing may be more focused on your credit score and/or loan-to-value ratio, and
- obtaining a portfolio loan on your permanent residence is tougher than encumbering a rental property!