When Can I Get a Mortgage After Short Sale?

If you sold your home through a short sale, you'll have to wait before you can qualify for another mortgage. Find out how long.

If you've lost your home through a short sale and want to get another mortgage loan, you might be wondering how long you'll have to wait. Your credit score will take a hit after a short sale, although possibly not as much as it would if you had lost your home to a foreclosure. Nevertheless, a short sale will likely prevent you from getting another mortgage right away.

The amount of time you must wait before applying for a new mortgage loan depends on the type of lender and your financial circumstances. The chart below shows how long the waiting period is after a short sale for different kinds of loans, with more details below.

Loan Type Waiting Period After Foreclosure
Fannie Mae/Freddie Mac

Generally: 4 years

Extenuating circumstances: 2 years

FHA-Insured 3 years (Generally, subject to some exceptions)
VA-Guaranteed Likely 2 years
Other Kinds of Loans Varies

Also, a short sale will cause a significant
decline in your credit scores, making it more difficult to get a new mortgage. The amount of that decline depends on the strength of your credit before losing your home. If you previously had excellent credit, your score will go down more than if you'd already had late payments, charged-off accounts, or other negatives items in your credit reports.

Getting a Fannie Mae or Freddie Mac Loan After Short Sale

Some mortgage loans adhere to guidelines that the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) set. These loans, called "conventional, conforming" loans, are eligible to be sold to Fannie Mae or Freddie Mac.

The waiting period for this kind of mortgage loan following a short sale varies, depending on the circumstances. Your waiting period will be:

  • four years or
  • two years, if extenuating circumstances—that is, situations which are one-time only, beyond your control, and resulted in a sudden, significant, and prolonged reduction in income—exist.

Getting an FHA-Insured Loan After a Short Sale

The amount of time you must wait to obtain a new FHA -insured mortgage varies, depending on your credit history and the reasons for the short sale.

When a Waiting Period Isn't Required

You might not have to wait to apply for an FHA-insured mortgage loan following the short sale if:

  • you made all mortgage payments on the prior mortgage within the month due for the 12-month period preceding the short sale, and
  • you also made your installment debt payments for the same time period within the month due.

Three-Year Waiting Period

If you were in default on the old mortgage loan at the time of the short sale, then you usually must wait at least three years before applying for another FHA-insured loan.

Exceptions to the Three-Year Waiting Period

You might be able to qualify sooner than three years if you can show that extenuating circumstances caused the mortgage default, like a serious illness or death of a wage earner.

Getting a VA-Guaranteed Loan After a Short Sale

You'll generally have to wait two years after a short sale before you can get a VA-guaranteed loan, but you might not have a waiting period if you made payments on time prior to the sale.

Other Types of Loans

For most other types of loans, like subprime loans or jumbo loans, waiting periods can vary. Some lenders follow Fannie Mae's guidelines. Other lenders shorten the post-short sale waiting period, provided that you make a larger down payment—sometimes 25% or more—and agree to a higher interest rate. You'll also need to have good credit.

Your FICO Score Also Affects When You Can Get a New Mortgage Loan

Notwithstanding the waiting periods, you must still establish good credit following a short sale to get a mortgage loan. So, your credit score, usually your FICO score, must meet the lender's minimal requirements to qualify. Alternatively, while you might be able to obtain a new mortgage with a low FICO score, you might have to make a larger down payment or pay a higher interest rate.

Which Credit Score Is Usually Used for Mortgages?

FICO is the most common score used in the mortgage-lending business. Scores generally range from 300 to 850. FICO has many different scoring models, like FICO, FICO 8, and FICO 9. A person's score usually varies depending on the model used to produce it and which credit reporting agency provided the underlying credit report. For instance, Fannie Mae and Freddie Mac generally require mortgage lenders to use the "Classic FICO" credit score to measure credit. The Classic FICO score is also called these names at the major credit reporting agencies:

  • Equifax Beacon® 5.0
  • Experian/Fair Isaac Risk Model V2SM, and
  • TransUnion FICO® Risk Score, Classic 04.

As of October 2020, Fannie Mae generally requires borrowers to have a credit score of 620 or 640, depending on how the loan was underwritten. Depending on the circumstances, Freddie Mac requires a score of 620 or 660 for a single-family primary residence. Of course, lenders may have stricter requirements.

Re-Establishing Good Credit After a Short Sale

Short sales damage FICO scores. And the higher your credit score, the bigger the FICO drop with a short sale. To re-establish good credit and boost your FICO score, you should:

  • always pay your bills on time
  • keep your credit account balances low
  • monitor your credit report for errors and inaccuracies, and
  • maintain a small number of credit accounts.

Monitor and Correct Your Credit Report

Review your credit report immediately if you anticipate applying for a new mortgage following a short sale. That's because short sales are sometimes reported as "foreclosures" on credit reports. If your short sale is reported as a foreclosure on your credit report, you might be erroneously denied a new mortgage loan because:

  • your FICO score is lower than it should be (foreclosures are usually more damaging to FICO scores than short sales)
  • the lender mistakenly applied a longer post-foreclosure waiting period against you when you would have otherwise qualified, or
  • the lender required you to make a higher down payment than what you would have been required to make if the short sale were properly reported.

You should contact all three major credit reporting agencies to correct the error and be prepared to supply documentation of the short sale to your lender.

Talk to an Attorney

If you have questions about mortgages or buying a home, consider talking to a real estate attorney. If you have questions about foreclosure, consult with a foreclosure lawyer.

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