Mortgage after a Foreclosure, Short Sale, Deed-In Lieu in NJ. I. Mark Cohen Law Group, Tintnon Falls NJ
I frequently get asked how long it takes to obtain a mortgage after having gone through a foreclosure, short sale, or deed-in-lieu of foreclosure in New Jersey. I would like to give you some guidance and answer these questions to the best of my ability. Please keep in mind that this information is for guidance purposes only. How long does it exactly take? You will know for sure when you have approval on that new mortgage.
Foreclosure to Mortgage Eligibility
A foreclosure occurs after non-payment on a mortgage for a period of time. A judgment of foreclosure is entered after a foreclosure lawsuit is over and has been decided in favor of the mortgage company. After judgment is entered, a home is sold at a sheriff’s sale.
After going through a foreclosure, expect to wait approximately seven (7) years from the foreclosure completion date to be eligible to purchase a home with a conventional Fannie Mae or Freddie Mac mortgage. The waiting period is about three (3) years from the foreclosure completion date to qualify for an FHA loan.
Short Sale to Mortgage Eligibility
A short sale means that your mortgage company has agreed to allow you to sell your home for less than the amount owed on the mortgage. This takes place like a conventional real estate transaction except you are not responsible for bringing a check to the real estate closing to cover the difference between the amount owed on the mortgage and the amount your home is selling for. For example, if you have a mortgage for $475,000.00 and your mortgage company approves a short sale for $395,000.00, you take $0.00 away from the closing but do not have to pay $80,000.00 in order to close. Nor are you held liable for this $80,000.00 deficiency.
Short Sale to a Conventional Fannie Mae Mortgage
After having a short sale on your credit report, you can be eligible for a conventional Fannie Mae mortgage in as little as two (2) years with an 80% loan-to-value (LTV) ratio. LTV is a term used by lenders to represent the ratio of the first mortgage as a percentage of the total appraised value of the home. For example, if someone buys a home for $300,000.00 and borrows $240,000.00 to purchase the home, the LTV is 80%. Higher LTVs indicate more risk for a lender. To get a Fannie Mae mortgage with a 90% LTV, the waiting period after a short sale is about four (4) years. For loans at the maximum range of the LTV eligibility matrix, expect to wait seven (7) years from the time of a short sale.
Short Sale to a Conventional Freddie Mac Mortgage
You can be eligible for a conventional Freddie Mac mortgage roughly four (4) years after the completion of a short sale.
Short Sale to an FHA Mortgage
You can be eligible for an FHA mortgage three (3) years after the completion of a short sale. This timeframe can be shorter on a case-by-case basis.
Deed-In-Lieu of Foreclosure to Mortgage Eligibility
A deed-in-lieu of foreclosure means that your mortgage company has agreed to accept the deed back to your home instead of having the home go through foreclosure. After a deed-in-lieu, the timeframes to qualify for a mortgage are the same as if you went though a short sale.
I hope that you find this helpful! As always, contact me with any questions.