Mortgage Credit Status To Watch For Regarding Previous Short Sale
Chapter 5,8,9 are synonymous with a foreclosure- the big F Word in mortgage lending which prevents a consumer from successfully getting a mortgage two years post short sale.
Here’s the requirement: “A borrower is eligible for conventional loan 24 months post short sale at 80% loan minimum.”
How Status Affects New Mortgage Loan
All mortgage lenders run each loan through what’s called an automated underwriting system (AUS) like a search engine for mortgage lenders, but it evaluates the credit, debt, income, and assets of the consumer, and renders a preliminary approval the loan is eligible for delivery to Fannie Mae or Freddie Mac.
The chapter 5, 8, or 9 status is identified on the credit report and does not pass an automated underwrite on a conventional mortgage thereby stopping the loan before an official human underwriter reviews the file for creditworthiness.
Action Steps To Take
- Write the creditor reporting the erroneous credit status
- Include copy of the final settlement statement aka final HUD 1 (closing statement from previous property) and a copy of the grant deed deeding the property from you to the buyer- may need to get this information from the previous title company who handled selling your previous property
- Indicate in this letter whatever credit reporting status Chapter 5, 8, or 9- whichever it is so lender is aware of what needs to be corrected
- Wait approximately 2 months for confirmation
- Apply for mortgage again
Mortgage tip: if the previous property was in fact a foreclosure, a three-year window is required to get a mortgage again with as little as 3.5% equity on a primary home. 7 years must have passed for conventional financing post-foreclosure, four years with extenuating one-time economic hardship circumstances).
If you’re looking to successfully secure mortgage and you had a previous short sale, we can help start by getting a complementary mortgage rate quote now, it is free and no credit check is required!
