Two big grins greeted me when I walked into the small conference room with loan documents under my arm. Amit, the buyer and Moti, her Realtor© had worked hard to get to this point. Moti had found a cabin for sale surrounded by trees and lots of land in the Santa Cruz Mountains. It needed some work, but Amit is a highly creative woman, and she was eager to begin putting her personal stamp on her new home.
This transaction was especially gratifying for me personally, because Amit and I have been friends for nearly ten years. She divorced some years earlier, and her former husband sold the family home for less than the loan balance—a short sale. Because the loan was in Amit’s name, the short sale (and the late payments leading up to it) appeared on her credit report, severely affecting her ability to get mortgage financing, even though she had not been responsible for the late payments or involved in the short sale.
“I would love to own a home again,” she told me earlier this year, “but I have to wait seven years because of the short sale, right?” It is true that a certain amount of time must elapse after a short sale or foreclosure (it is called “seasoning”), but the requirements vary according to loan program, down payment and other circumstances. Since Amit had enough cash to make a 20% down payment, she was eligible for a new loan just two years after the short sale.
“You’re kidding, right?” she said to me when I told her this. “Are you telling me someone will actually lend me money to buy a house?” She was wide-eyed at the prospect.
“Sure,” I told her. “We’ll have to jump through the usual hoops, but we can definitely do this.” I gave her the list of documents I would need to process her loan.
Four months after that conversation, we were sitting around the table, signing an inch-thick stack of loan documents. She will move into her new home in less than a week.
There is a lesson in this. There is a common narrative—a false one—that goes like this: “Rates are really good today, but who can qualify?” And this one: “Even if you can get a loan by some miracle, you won’t be able to get an offer accepted. There are too many cash buyers out there.” The reason these two narratives are damaging is that many people buy into them—and don’t bother to try to make their dream a reality.
Fortunately, my friend Amit (and her talented Realtor©, Moti) refused to accept these fictions. Other people who have been through short sales may not have to wait at all. Under some conditions, a homeowner who had a short sale may be able to qualify for an FHA loan (with a 3.5% down payment) with no seasoning at all!
Here is the point: if you have a dream—home ownership in the case of my friend Amit—you should get all the facts available before giving up on it.
You might just be pleasantly surprised.