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With home values having fallen so much since the peak in 2006, it’s no surprise that many Americans today have a short sale in their credit histories. With many wanting to become homeowners again, a question I commonly get is when can I buy a house after a short sale?
First of all, it’s important to understand there isn’t any restriction on buying a home after a short sale, just on getting a home loan after a short sale. You certainly are free to purchase a home, you’ll just need to find a very flexible lender (which could be tough) or purchase the home with cash.
Getting financing through the traditional sources likely will be difficult because the majority of financing out there right now is subject to either Fannie Mae or FHA guidelines, both of which restrict lending to homeowners with short sales in their credit history.
What is a Short Sale?
If you’re not familiar with the term “short sale”, it refers to the sale of a home in which the selling price is lower than what is needed to pay off the mortgage. To make a short sale happen, the homeowner (or agent on their behalf) negotiates a reduced balance with the bank so that the house can be sold.
While better than a foreclosure, it’s important to understand that a short sale will typically still damage your credit and could have tax implications. Make sure you consult with a tax or legal expert before considering a short sale.
When Can I Buy a House After a Short Sale?
The following is a general rundown of the short sale waiting period guidelines for Fannie Mae and FHA. Note that these guidelines are subject to change at any time and often have more detailed nuances than what is addressed here. It’s important to consult with a qualified mortgage professional for more specific information about your particular situation.
Fannie Mae Short Sale Waiting Period
The standard waiting period to obtain a new Fannie Mae loan is four years, but it can be as little as two if you are willing to come in with a larger down payment than otherwise required were it not for the short sale. Other guidelines can apply, so it’s important to check with your lender about your particular situation.
FHA Short Sale Waiting Period
If you were current on your mortgage payments and all other installment loans (such as car loans, student loans, etc.) for the 12 months preceding the short sale, there is no waiting period according to FHA guidelines. However, if you were in default on your mortgage at the time of the short sale (which is probably the case for most short sales), the waiting period for a new FHA loan is 3 years.
It’s possible the waiting period can be reduced or eliminated if there are extenuating circumstances beyond your control that led to the short sale (such as loss of income due to death of family member, severe illness, etc.). Though FHA guidelines allow for extenuating circumstances, it doesn’t mean the bank lending the money will as well. This is a gray area in the guidelines and some banks simply don’t want to mess with it.
Work on Rebuilding Your Credit Right Away
If you’ve recently been through a short sale, it’s important that you begin taking steps to rebuild your credit right away. Time is the best healer of credit issues, but if there are any lingering items that need to be resolved on your credit report, getting them taken care of sooner rather than later could make it much easier to qualify for mortgage financing once the waiting period is over.
Conclusion
This is just a very general overview and other guideline nuances can apply. For more detailed information about your particular situation, consult with a qualified mortgage professional.
It’s also important to note that though these are the standard guidelines for Fannie Mae and FHA, lenders that underwrite to Fannie Mae and FHA guidelines might add their own more restrictive guideline overlays.
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I had completed modification in April of 2010, during modification process I was in foreclosure, so on my credit now I have “mortgage lates of 90 days”, but since April 2010 I have been current on all my loans and credit cards. I’m still upside-down on my current primary residence. My question is, do I have a chace of getting FHA loan now in my situation? If not, than if I wait a bit longer do I have a chance of getting a loand than?
Thanks!
Hi Victor, it’s good that you no longer have mortgage lates. Lenders typically want to see that you’ve had no lates at all in the last 12 months. However, the loan modification is going to be an issue. For FHA, you’re going to have to wait until a few years have elapsed before you’ll be able to qualify with the loan mod on your record. Lenders see it as a type of loan default, so there’s typically going to be a waiting period of at least a few years to qualify for new mortgage financing. Thanks for stopping by!
I have the same situation. It has been almost 2 years. How long is the wait before qualifying for a new loan? FHA or Conventional.
I am in the process of short selling my FHA home. I currently have good credit. We have not been late on any of our payments. My wife lost her job and we cannot afford our house anymore. How long do we have to wait to buy a smaller home? How long do you have to wait before getting a FHA home?
Hi John,
If you have no late mortgage payments associated with the short selling of your home, then you probably can qualify FHA right away. If you do have late payments, you’ll need to wait 3 years before you can go FHA. Thanks!
I short sold my house in April of 2010. The Mortgage was the only late payments I have on my credit score. Everything else was paid in time
The reasons were related to my daughter being born with special needs which required one of us to stays home and on top of that I lost my job towards the end of 2009. We live in California
Now we are doing much better financially. We caught up with CC bills and saved up some money
I want to buy a house that costs 180K and I have around 80k for a downpaymet
Is it doable?
Hi Marus, thanks for stopping by! It sounds like you definitely have some extenuating circumstances there. I’m glad things are going better! You’re not that far from the two year anniversary of the short sale, so it might be worth calling around to see if anybody can help you. You have a large down payment, so that should help. Just be upfront with the people you talk to on the phone about your situation and what you want to get done so you find out quickly if it’s something they can do for you. Good luck!
This whole industry including banks/lenders are full of shit. Their only interest is sucking people dry–that’s it; that’s their business model. Move to another country, people. This is the US of screw you A.
My husband had a short sale of (land) approx 4 yrs ago…we own our home together and are wondering if we could qualify for a re-financing of our current home…we owe a 1st mortgage and a heloc and would like to tie them both together and pay off some credit cards also…would we qualify for a refinance??? thank you
Yes, if you’re past the 4 year point, it could be possible to qualify for a loan to consolidate the HELOC and credit cards. Keep in mind that would be considered cash out financing, which is typically limited to 80% of the value of the home. Thanks for stopping by!
thanks for giving us hope….have a blessed day:)
Is it safe to get a loan from a private investor? rather than going with a Bank?
Hi Jorge, yes, private investors can be a great way to go if you can’t easily get financing through a traditional bank. Just make sure to do your homework and maybe have an attorney look over the loan contract to make sure there isn’t anything that could be a problem for you later. You probably won’t get quite as aggressive a rate as you would through a bank, but it could be a great way to get financing for now and you can always refi it later for a better rate.
I just have one rental property that’s worth currently way below than what i owe. I am current with my mortgage right now but i dont think I can keep up with mortgage. If i shortsale it right now with my bank, how long do I have to wait in order to buy another house, and will it affect my credit even if i shortsale it with current payments?
Hi Joseph, the standard waiting period is 4 years for a Fannie Mae loan and 3 years for FHA. There could be zero waiting period for FHA, but only if there are no late payments on the mortgage prior to the short sale.
We are finalizing a short sale on our house. We have credit scores in the 800′s currently, nothing has ever been late. We just needed to get out from under an under water mortgage. We can’t find a house we would like to buy, will it hurt us to rent for a year or so while we look for our new home?
Hi T, renting for a year is no problem from a mortgage qualifying standpoint. If you had no late payments before the short sale and you rent for a year qualifying for a loan should be straightforward once you’re ready to buy. Thanks for stopping in!
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