Applying For an FHA Loan After A Short Sale

In this blog, we will cover and discuss qualifying for an FHA loan after a short sale. Homeowners with a prior short sale can qualify for an  FHA Loan After A Short Sale And Foreclosure as long as they meet the mandatory waiting period after the short sale and re-established credit. Most lenders do not want to see borrowers without any late payments or derogatory credit after their short sale and foreclosure. Lenders do expect re-established credit and at least three credit tradelines that have been seasoned for at least 12 months.

How Long After Short Sale Can A Homebuyer Qualify For An FHA Loan
How Long After Short Sale Can A Homebuyer Qualify For An FHA Loan

To qualify for an FHA Loan After A Short Sale And Foreclosure, the borrower needs to wait three years from the date of the short sale or recorded date of foreclosure and/or deed in lieu of foreclosure. Just because someone has waited out the 3-year mandatory waiting period after short sale and foreclosure does not. automatically qualify borrowers for FHA Loan After a Short Sale And Foreclosure. We will cover more on qualifying for FHA Loan After A Short Sale And Foreclosure in a later paragraph.

What Is A Short Sale Versus Foreclosure?

A short sale is when a homeowner has a home that is worth less than the amount of the balance of their mortgage loan. With short sales, borrowers will get the mortgage lender’s blessing to sell their home below what they owe and in lieu, the lender will not come after the homeowner for the deficiency. Just because a homeowner owns a home that is worth less than the amount of mortgage balance does not automatically guarantee that the lender will approve a short sale. There is a process involved with getting a short sale approved by the mortgage lender. The lender will want to see the homeowner’s financials.

How To Get A Short-Sale Approved By The Lender

Lenders also want to see that homeowners are financially distressed and cannot afford mortgage payments either due to loss of employment, new employment with less pay, or other extenuating circumstances such as divorce or medical issues. Homeowners who have plenty of assets, solid income, and good credit thinking of short sale just because the home is underwater, mortgage lenders will most likely not approve the short sale.

How Does A Short Sale Work

A short sale process takes time. Most short-sale homes take much longer to close. Everything from pricing and listing home, to purchase offers, to the mortgage approval process all need the lender approval on short sales. If the home buyer of the short sale home needs an extension to the closing date, the seller of the home has not said so and needs the lender’s approval. Lenders who own the home do not get back right away. Lenders normally take their time. Normal real estate purchase short sale transactions take 90 plus days to close. However, with short sales, closings can take 3 to 6 months if not longer due to the red tape of the mortgage lender.

Getting Pre-Approved For FHA Loan After a Short Sale
Getting Pre-Approved For FHA Loan After a Short Sale

As mentioned earlier, borrowers need to meet the mandatory three-year waiting period after a short sale to qualify for an FHA Loan After a Short Sale And Foreclosure. However, just waiting out the mandatory three-year waiting period after a short sale does not automatically qualify borrowers for an FHA Loans. Lenders want to see re-established credit after a short sale and no late payments after short sale and foreclosure. For example, for homeowners who had a short sale three years ago and had several late payments in the past 12 months recently, can present an issue with getting an approve/eligible per Automated Underwriting System (AUS).

Qualifying For A Mortgage After Prior Bad Credit
Qualifying For A Mortgage After Prior Bad Credit

Lenders understand that consumers go through periods of bad credit due to extenuating circumstances such as unemployment, loss of business, divorce, or medical reasons. But people that go through tough financial times do recover and what lenders want to see from borrowers when they recover is that they have re-established credit and are making their monthly credit payments on time. One thirty-day late payment on a consumer’s credit report can plummet their credit scores at least 50 or more FICO points. That late payment history will stay on their credit report for a period of 7 years.

Qualifying For FHA Loan After A Short Sale

As long as borrowers have passed the mandatory three-year waiting period after short sale and foreclosure, have solid full-time employment with verifiable income, at least a 580 FICO credit score, no late payments after a short sale and/or foreclosure, and re-established credit after a short sale, homebuyers should not be concerned. Borrowers should definitely qualify for an FHA Loan. Home Buyers are looking for an FHA mortgage company with no lender overlays, please contact us at Capital Lending Network, Inc. at 800-900-8569 or text us for a faster response. Or email us at contact@capitalendingnetwork.com . We are available 7 days a week, on weekends and holidays as well. You can also go APPLY ONLINE by clicking APPLY NOW. CLN Mortgage Group is a national lender with no lender overlays on government and conventional loans.


Peter has 7+ years of experience in residential lending. He is a licensed Realtor in the Chicagoland area.