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Can You Qualify for a USDA Loan after Short Sale?

February 12th, 2021 by Sean Stephens

Can you qualify for a USDA Loan after Short Sale?With the many short sales that were finalized in 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. This free guide breaks down the USDA process step by step, so don’t be scared – be aware!

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

USDA Short Sale Qualifying Guidelines

Updated USDA guidelines state the following regarding short sales:

“A short sale allows a homeowner to sell their property for less than the balance due on the mortgage. All sales proceeds go to the lender. The lender will either forgive the difference owed or a deficiency judgment may be obtained to require the borrower to repay the lender all or part of the remaining balance. The short sale will be reflected in the applicant’s credit score and public records. Lenders must confirm the Declarations in GUS and/or the loan application are completed accurately.”

How long do you have to wait to qualify for a USDA loan after a short sale?

Approved Florida USDA lenderUSDA guidelines further state that a “short sale closed 36 months prior to the date of loan application is not adverse credit.”

One exception to the 36 month rule is when you obtain an ACCEPT response through the USDA Guaranteed Underwriting System (GUS).  When you are able to obtain this automated acceptance, then no credit exception is required for waiting periods less than 3 years (36 months)

However, if your file receives a GUS response of Refer, Refer with Caution, or for those manually underwritten loan files, “a credit exception is required when the applicant has a short sale closed 36 months prior to loan application.”

As a USDA approved lender, we utilize and have access to the GUS underwriting system which allows us the ability to review the findings upfront and help determine your eligibility.

Can you qualify for a USDA loan after a short sale that was due to a divorce?

 USDA guidelines address these situations with the following guidance:

“An applicant that has a short sale closed post-divorce/recorded legal separation agreement and the home was awarded to the ex-spouse/remaining party may document the loan was paid as agreed prior to date of divorce decree/legal separation agreement. The payment history on the credit report or other documentation from the loan servicer/lender may be retained to confirm eligibility.”

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 sooner than you think!

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.

Just call or email to discuss your scenario and let us show you the “Metroplex” difference.

800-806-9836 Ext. 280
SeanS@MPLX.org

As always, I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!

P.S. To see all waiting periods for each loan type, feel free you can download our complimentary loan comparison chart here.

Short Sale waiting periods

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