Qualifying for a Mortgage after a Short Sale

Is it possible to buy a home again after a short sale?   Of course it is.

With qualifying credit and the passage of time you certainly buy a home again after a short sale.   The amount of time that needs to pass depends on the circumstances of the short sale.  Just to get the quick definition out of the way… A short sale is when you have negotiated with your mortgage lender to sell the house for less than the mortgage balance.

The amount of time that needs to pass depends on the circumstances of the short sale. Below is the amount of time that must pass with each of the most common mortgage programs.

Conventional

General Rule: 4 years

The applicant cannot close on a new home purchase until at least 4 years have passed since the sale date of the property that experienced a short sale.

Exception: 2 years with documented extenuating circumstances

FHA

General Rule: 3 years

The applicant may not apply for a new home purchase until at least 3 years have passed since the sale date of the property that experienced a short sale.

Exceptions: No wait period if the mortgage on the short sold property had no late payments for the 12 month period leading up to the short sale. 

If the mortgage on the short sold property was an FHA mortgage and had late payments then the 3 year period begins on the date that the FHA paid any claim associated with the short sold mortgage. These claims sometimes take a few months to process, so for instance, if you had a short sale occur in July 2015 and the FHA did not pay the claim until October 2015 then you would not be eligible to apply for a new FHA mortgage until October 2018.

USDA

General Rule: 3 years

VA

General Rule: 2 years

Exception: 12 months if there are documented extenuating circumstances. If the short sold home had a VA mortgage then this may affect your remaining VA eligibility.  Your VA Certificate of Eligibility will officially determine the amount of eligibility.