Information for Borrowers Who Lost Their Homes

Filed under: Fannie Mae

homesFor one-time homeowners who suffered specific types of a major financial crisis, Fannie Mae is now making it easier for borrowers to become homeowners once again.

Fannie Mae is reducing waiting times and lowering down payment requirements needed to qualify for a mortgage, according to a recent article by Kara Johnson.

If you were a former homeowner who lost your home through either a pre-forclosure sale or a deed-in-lieu of foreclosure, you can now get a new mortgage as early as two years after the major financial event with as little as a 5% down payment, as long as there are “extenuating circumstances.”

Without the extenuating circumstances, the waiting period is four years, but the 5% down payment would still be in effect.

These “extenuating circumstances” are specifically defined as a “one-time” events that were beyond the borrower’s control that resulted in a significant loss of income or a major increase in the borrowers’ financial obligations. This may include events such as losing one’s job or having a major medical crisis.

Fannie Mae did specify that borrowers would still have to meet all the other financial requirements and be considered credit worthy in order to qualify.

In the past, borrowers with extenuating circumstances had to make at least a 10% down payment. And, if a borrower who lost his or her home did not have extenuating circumstances, the borrower would to wait four years with a 10% down payment, or wait seven years to become eligible for Fannie Mae’s minimum down payment.

According to Johnson, these new rules are expected to provide simplified guidance for lenders while still maintaining a sufficient time period following a derogatory credit event.

It is important to note that former homeowners who happened to lose their homes to a full foreclosure, the standard minimum waiting time will remain seven years. However, this waiting period could be reduced to three years if the former homeowner endured an extenuating circumstance.

And, if there was a bankruptcy involved, the waiting time could be four years, but there are specific details surrounding bankruptcy. For example, Fannie Mae will allow borrowers who had a single bankruptcy to actually qualify for a new mortgage in as little as two years if the borrower can document an extenuating circumstance.

If the borrower filed for a Chapter 7 or 11 bankruptcy without an extenuating circumstance, the waiting period is four years. A Chapter 13 bankruptcy will allow a borrower to qualify for a new mortgage in as little as two years after the discharge date.

If you have any questions dealing with any aspect of the mortgage world, please give me a call and we can discuss what is on your mind.




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