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Can you Qualify for a USDA Loan after a Short Sale?

April 1st, 2016 by usdaadmin

Can you qualify for a USDA loan after a short sale?

With the many short sales that were finalized in the recent years, prospective buyers are now looking to re-qualify to purchase a home. Updated guidelines specifically address how to qualify for a USDA loan after a short sale, and today’s video tip will go over the details to keep you in the know.

Before we get started don’t forget to download our USDA blueprint for success with the link below. This free guide breaks down the USDA process step by step, so don’t be scared – be aware!

Effective March 9th, 2016 USDA has updated their 3555 handbook which now includes revised guidelines on how to qualify for a USDA loan after a short sale.

can-you-qualify-for-a-USDA-loan-after-a-short-sale

Can you qualify for a USDA loan after a short sale? 

As a starting point, the actual definition itself remains the same:

  • A short sale is considered a pre-foreclosure activity, and
  • An applicant is ineligible for a mortgage loan if they pursued a short sale agreement on their principal residence to take advantage of declining market conditions and purchases at a reduced price a similar or superior property within a reasonable commuting distance.

can-you-qualify-for-a-USDA-loan-after-a-short-sale

However, the following highlighted sections have been added:

“An applicant in default on their mortgage at the time of the short sale (or pre-foreclosure sale) is generally not eligible for a new mortgage loan for three years from the date of pre-foreclosure sale.”

“If an applicant was current at the time of short sale, or in the case of divorce at time of divorce, they may be eligible for a new mortgage loan. The prior mortgage payment history must reflect all mortgage payments due were made on time for the 12 month period preceding the short sale, or time of divorce, and all installment debt payments for the same period were also made within the month due.”

Additionally, the lender has also been provided with the ability to grant an exception in accordance with existing USDA credit exception guidelines which would be viewed on a case by case basis.

In summary, USDA guidelines now permit more flexibility and depending on the circumstances, it can be possible to qualify for a USDA loan after a short sale.

Please remember that credit scores do not guarantee approval and minimum credit conditions will apply.

Remember, not all lenders have experience with processing and closing USDA loans.  Metroplex Mortgage Services is an approved USDA lender, and we are known for our program expertise and have specific systems in place to process USDA loans from pre-qualification to closing.

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