Mortgage Guidelines After a Short Sale

In this blog, we will be covering the FHA waiting period after short sale 2022 mortgage guidelines. HUD, the parent of FHA, along with other mortgage agencies such as VA, USDA, Fannie Mae, Freddie Mac has mandatory waiting period requirements after short-sale and/or other housing events. FHA waiting period after short sale requirements is a three-year waiting period from the date of the short sale reflected on the Closing Disclosure (CD) for a homebuyer to qualify for an FHA loan. 

What Is A Short Sale?

A short sale is when a homeowner has a mortgage with a balance that is higher than the value of the home and gets the lender’s permission to sell the home for a price below what they owe on the home. The process of a short sale can be time-consuming Before a home can be listed as a short sale home, the homeowner’s lender needs to review the homeowner’s following credit and income profiles:

  • financials
  • the amount the homeowners owes
  • the market value of the home
  • homeowner’s potential future job stability and income

A short sale is an alternative to foreclosure:

By cooperating with the bank, the homeowner can get out of their home without their lender coming after them for the deficit or shortage of what they owe on their mortgage note. The price their homes have sold for is comparable to the subject property.

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

Homeowners who are currently going through a short sale or have gone through a short sale can qualify for an FHA loan after a short sale if they meet the mandatory minimum FHA Guidelines. Need re-established credit and a minimum credit score of 580 FICO to qualify for a 3.5% down payment FHA loan. HUD allows borrowers with under 580 FICO and down to a 500 credit score to qualify for an FHA loan with a 10% down payment.

Reestablishing Credit After Short Sale To Qualify For An FHA Loan

Once the short sale of a home is finalized and reported on credit reports, credit scores will plummet by more than 100 points. However, this drop is a temporary drop. As long as consumers have credit tradelines and maintain perfect payment history, credit scores will increase as time goes by. Consumers who do not have credit tradelines should immediately get three to five secured credit cards. For maximum effect, consumers should have at least a $500 credit limit on each of the secured credit cards. As consumers maintain a low credit balance on those secured credit cards and pay them on time, credit scores should definitely improve.

Can I Qualify For An FHA Loan After Short Sale With Late Payments?

Lenders do not want to see any late payments after a short sale. Make sure to religiously make minimum monthly payments on time. One 30-day late payment will drop credit scores. That payment history will be reflected on the credit report for seven years.

When Is The FHA Waiting Period After Short Sale Start Date?

To qualify for FHA Loan After Short Sale, there is a three-year mandatory waiting period after short sale with re-established credit. The three-year waiting period time clock starts from the date of the short sale that is reflected on the HUD Settlement Statement of the short sale. You cannot have any late payments after a short sale. One or two late payments may not be a deal killer, but to get an approve/eligible per AUS, timely payments after a short sale are normally required.

Start Building Your Credit With Secured Credit Cards After Short Sale

With waiting out the three-year waiting period and having re-established credit with timely payment history, borrowers should qualify for FHA Loan After Short Sale with no problem.

With waiting out the three-year waiting period and having re-established credit with timely payment history, borrowers should qualify for FHA Loan After Short Sale with no problem. Borrowers with a prior short sale and want to get the process of qualifying for FHA Loan After Short Sale prior to the waiting period, please contact me at 262-716-8151 or email me at gcho@gustancho.com. We can pull a credit report and make sure that there are no errors in the credit report as well as to see ways of maximizing credit scores. We will help borrowers prepare and qualify for an FHA loan way ahead of time so when they meet the waiting period they will be 100% ready to go.

FHA Lenders With No Overlays On Waiting Period After Short Sale

Capital Lending Network, Inc. consists of a team of loan officers, sales managers, branch managers, and regional managers nationwide has a national reputation for its no-lender overlays business model. Over 75% of our borrowers at CLN Mortgage are folks who could not qualify at other lenders due to their overlays.

FHA Waiting Period After Short Sale And Deed In Lieu Of Foreclosure Mortgage Guidelines

How to qualify for a mortgage after Short Sale and deed in lieu:

  • Home Buyers can qualify for a mortgage after short sale and deed in lieu of foreclosure
  • There are mandatory waiting periods to qualify for a mortgage after short sale and deed in lieu
  • The waiting period depends on the loan programs
  • However, Capital Lending Network, Inc. launched NON-QM Loans
  • There is no waiting period after short sale and deed in lieu to qualify for a mortgage loan
  • There is no waiting period after a standard foreclosure with NON-QM Loans
  • There is no mandatory waiting period after Chapter 7 Bankruptcy

FHA Waiting Period After Short Sale: How Can I Qualify For FHA Loans After Short Sale 

Borrowers are eligible for FHA insured mortgage after short sale and deed in lieu as well as a foreclosure if they meet the following:

  • 3 year waiting period after the short sale date of the prior home which is reflected on the HUD-1 Settlement Statement
  • 3 year waiting period after the recorded date of deed in lieu and/or foreclosure reflect on the county recorder’s of deeds office
  • The waiting period does not start until the deed of the property has been transferred out of the name of the homeowners
  • Deed needs to be transferred into the lender’s name or other name or date of sheriff’s sale
  • There is no waiting period after a short sale if the borrower has been timely with all of their mortgage payments as well as other credit payments up to the date of the short sale

Furthermore, borrowers need to have been timely for the past 12 months.

Waiting Period On Conventional Loans With 20% Down Payment After Short Sale 
Waiting Period On Conventional Loans With 20% Down Payment After Short Sale 

The two-year waiting period after short sale and deed in lieu with a 20% down payment to qualify for conventional loans is no longer in effect. This section will remain posted for archival purposes:

For those who have had a prior short sale or a deed in lieu of foreclosure, they can qualify for a conventional mortgage loan with the following conditions:

  • 2 years from the recorded date of the deed in lieu of foreclosure or after 2 years from the date of the short sale HUD Settlement statement only if they have a 20% down payment
  • There cannot be any late payment histories since the deed is in lieu of foreclosure and/or short sale and they need to show re-established credit

Again The Above Conventional Guidelines After Short Sale And Deed In Lieu no longer exist. New waiting period Conventional Guidelines have been implemented and launched:

Unfortunately, the two-year waiting period to qualify for a conventional loan after short sale and deed in lieu with 20% down payment no longer is in effect with Fannie Mae and Freddie Mac as of August 2014.

  • The new waiting period to qualify for conventional loans after short sale and deed in lieu is 4 years from the short sale date and/or the recorded date of the deed in lieu of foreclosure
  • Minimum of 5% down payment and re-established credit with a minimum credit score of 5% down payment
  • The waiting period to qualify for a conventional loan after a standard foreclosure is 7 years
  • There is a four-year waiting period to qualify for conventional loans after Chapter 7 Bankruptcy
  • There is a two-year waiting period to qualify for conventional loans after the Chapter 13 Bankruptcy discharged date
  • There is a four-year waiting period to qualify for conventional loans after the Chapter 13 Bankruptcy dismissal date

Fannie Mae Guidelines On Mortgage Part Of Chapter 7 Bankruptcy

There are instances where borrowers may qualify for conventional loans but not FHA, VA, USDA loans if they have mortgage part of Chapter 7 Bankruptcy.

There are instances where borrowers may qualify for conventional loans but not FHA, VA, USDA loans if they have mortgage part of Chapter 7 Bankruptcy. Borrowers with mortgage or mortgages part of their Chapter 7 Bankruptcy can qualify for conventional loans in 4 years from the discharge date of the Chapter 7 Bankruptcy discharged date. This holds true even though the foreclosure, deed in lieu, or short sale has been recorded after the discharge date. This rule only applies to conventional loans. With government loans, the waiting period clock does not start until the recorded date of the foreclosure, deed in lieu, or short sale date. The mortgage cannot be reaffirmed and the housing event needs to be finalized

Choosing The Best FHA Lender With No Overlays

Borrowers who need to qualify for a mortgage with a national mortgage company licensed in multiple states with no lender overlays on government and conventional loans can contact us at Capital Lending Network, Inc. at 800-900-8569 or text for a faster response. Or email us at contact@capitallendingnetwork.com. The team at CLN Mortgage is available 7 days a week, evenings, weekends, and holidays.


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