I am trying to arrange financing for my first REI, I will owner occupy the unit, it will be a multifamily house. I went through a short sale little over 2 years ago because of a divorce. I subsequently moved across the country so I could have joint custody of my children. I am trying to qualify for a FHA Loan 3.5% down. I know there rules state 3 years after a short sale to qualify. They state 2 years if you have had a "hardship."
My question is, does a divorce qualify as a hardship for FHA? Allowing my to finance after 2 years after a short sale.
Sorry, it looks like I put this under the wrong section, my first post, don't know how to re-categorize.
from West Palm Beach, Florida
Yes, a divorce will generally qualify you for a short sale (which apparently it did). FHA just wants to make sure you didn't simply do a "strategic" short sale, before they would look at you for a new loan. The 2-3 year limit is not automatic however, it's a minimum. It still depends on your current credit score/history. One of the factors will be how far behind you were at the time of the short sale. Attempting to get preapproved is the best way to find out (with tax returns, bank statements, etc., NOT with just W-2's and and an interview).
Real Estate Investor from Springfield, Missouri
FHA and secondary markets can accept divorce as a hardship in applying for new loans, if you were the respondent and lost significant income from the spouse your chances are better. And if there was a reason for the divorce beyound your control, they may ask for documentation to evaluate the situation. Other factors such as credit and ability to pay will also weigh heavily in obtaining any waiver or variance. Ask the lender how they see it, but at 97%, a few more months would probably help too.
I don't think the bank will care, but the divorce was not my choice and out of my control. I did loose significant income (my wife's salary). Was forced to relocate (leaving the house vacant) across the country, so I could be with my kids. The prior loan was VA, and paid the loan over 12 months while the house was vacant. I made improvements to the house to make it marketable (new doors, carpet, ect), and only stopped paying 2-3 months prior to the short sale closing, so the bank would consider the offer I had. Otherwise the bank would not even talk to me, literally.
My credit score is around 750 now. I can get private financing for a portion of the loan to get the LTV ratio below 80%, not sure how banks look at that? If that is something I should pursue.
The third option I have is to do all private financing, which would be 5.5% but have to pay the loan for min. of 10 years. I could still refinance, but would still have to make 10 years of payments at 5.5% to the private lender.
Anyways, I think I'll go talk to a couple of banks, and let you know what happens.