One of the biggest advantages in doing a short sale instead of foreclosure is the shorter waiting period before you are able to purchase a home in the future. For example, in certain circumstances one can be current on their payments and still do a short sale. And if a homeowner is current on their mortgage through a short sale, they can qualify for an FHA loan afterwards without any waiting period. The same option is not available following a foreclosure.
There are a number of variables that determine the length of the waiting period before you can purchase a home after a short sale, including the homeowner’s credit rating, extenuating circumstances and the guidelines of the lender you are working with.
While the timeline will vary according to each individual’s situation, here are some general guidelines on the waiting period for a loan after a short sale:
FHA loan after a short sale
- No waiting period if homeowner was current on mortgage when short sale closed
- 3 year wait if homeowner was in default at closing
- Less than 3 year wait if the homeowner has re-established good credit and can show extenuating circumstances
- 2 year wait if the homeowner puts 20% down
- 4 year wait if the homeowner puts between 10% to 20% down
- 7 year wait if the homeowner puts less than 10% down
- 2 year wait if the homeowner can show extenuating circumstances and puts more than 10% down
- 4 year wait before being able to get a loan
- 2 year wait if the homeowner can show extenuating circumstances
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