Fannie Mae Relaxing Rules
FNMA has recently announced the minimum waiting period to obtain a new mortgage after a short sale or deed in lieu foreclosure is being reduced. Effective, July 1, the wait will go from a minimum four to five years to two years. FNMA wants to encourage solutions for homeowners and to avoid foreclosure.
A minimum 20% down payment is required to qualify for the two year minimum payment. With 10% down the four year minimum will remain in place and less down will be longer. Foreclosures remain at a five year waiting period.
Extenuating circumstances, such as a job loss or a divorce, allows a two year minimum with 10% down. FNMA expects borrowers to reestablish their credit as well. Foreclosures and short sales generally have the same effect on a borrower’s credit score. Three active revolving or installment debt credit trade lines for a twelve month payment history will be required. Nontraditional credit will not be allowed.
FHA, with 3.5% down, is considering changes in their guidelines which currently requires a minimum of three years after a short sale or deed in lieu foreclosure.
