Home Buying in Evergreen>Question Details

Alhodge15, Home Buyer in Scottsdale, AZ

What is the "real" answer as to when we can buy a home after a past short sale??

Asked by Alhodge15, Scottsdale, AZ Mon May 14, 2012

We sold our home in 2010 in a short sale, but are still paying a portion of it back (promissory note). We were current on all of our debt payments before, during and after the agreement. We now make a significant amount more in salary and have credit scores in the 690-700 range. Apparently our credit status says "settled for less than owed" because we are now being told we have to wait the 3 year waiting period.
We were under the impression that since we stayed current on all of our payments, we would NOT run into this waiting period down the road. We have been given multiple answers as to the "waiting period" and are frustrated that we are being penalized for our short sale as if we were NOT current on our payments. Can anyone help us understand, or give us advice as to what our options are now? Our short sale closed in October 2010... and we would like to buy a new home soon here in Colorado as we have a family and we can very comfortably afford it! Thank you for your help!

Help the community by answering this question:


The upshot is to keep shopping. In fact, you should shop around anytime you are looking for a lender. Typically, the 3-year-rule applies. Thank goodness, it wasn't a foreclosure, then you could be looking at up to seven years.

You're coming up on the two-year anniversary, you should be able to get a pre-qualification letter and be able to move forward. That is, if there were extenuating circumstances that pushed you into a short sale. Even still, you might have some difficulty finding that lender.

Best regards,
1 vote Thank Flag Link Fri Aug 10, 2012
Hi. My name is Judy Downes and I am a Mortgage Banker for Champion Bank, a small bank in Parker, but I am located in Evergreen. I just saw your question. The general answer is 3, but some banks/financial insitutions will do at 2 years out of shortsale. Further, generally you are dealing with the date of filing, not the shortsale date-date of close.

Lending is based in regulations, guidelines and financial institution overlays-that institution's guidelines on top of federal guidelines or the lack of overlays for a specific company. Sometimes it gets down to how an institution interprets a word in a guideline which can make the difference between a loan closing or not. In my opinion, it has gotten easier not harder, but you have to be thorough and know the distinctions, matching that to a given client and situation. I would be happy to help you and can be reached at jdownes@the championbank.com. Good luck in any case.
1 vote Thank Flag Link Wed May 23, 2012
Hi, this is Judy Downes again. I thought I should add, that what you are indicating does not entirely make sense, as in a shortsale, there is an agreement between you and your lender for payment for less than owed, settled at closing but there can not be a promissory note (deficiency judgement) unless you had a true foreclosure where the property sold for less than owed, and you received a deficiency based on the judges entering same in which case you do not have a shortsale where the lender has accepted a lower pay off, but a foreclosure.
0 votes Thank Flag Link Thu Aug 15, 2013
Hi, my name is Judy Downes and I am a loan officer with Champion bank and thus do loans across the country, including a recent one in Scottsdale. First, I am sorry that you are finding this confusing. The reason for this is there are varrying guidelines dependent on loan type, the reason for the shortsale, your credit profile since the shortsale, whether there was a "hardship" situation, and of import is also the amount you are putting down or intending to put down on the current (new)property. An aspect which would effect timeframe would be whether you had additional credit issues, such as a bankruptcy which may "reset" the clock. Another aspect may be the particular lender you use, as company "A" may do a loan that company "B" would not. Additionally, being on a board of a company that does credit counseling, I can tell you that guidelines can shift both for the loan and the particular lendr. In the question above, assuming that your only derogatory is the shortsale, and your credit is re-established and acceptable, you would have to wait 3 yrs if you were doing an FHA loan. However, since you are paying off the derogatory, it is possible you fit into a special category. But, FHA loans are less attractive than they used to be as of the spring of this year and are not the only option to consider, there are other loan types that may fit you within the timeline that you are looking at. Good luck and you may contact me if you wish.
0 votes Thank Flag Link Thu Aug 15, 2013
The currency of your payments IS an important factor in re-establishing credit. That part is good, and probably necessary. You have not provided enough information to totally answer this question. A short sale is considered a foreclosure, a major derogatory because the financial institution took a loss on your decision to purchase that property which makes you more risky (more likely to default) but extenuating circumstances may make this waiting period only 2 years, not 3 or 4 or 7. Additionally, the type of loan you are attempting is important, as are very specific requirements in terms of re-established credit, additionally, the loan to value that you are attempting will come into play and of course, you will need a government underwriting approval. Unfortunately, there is not a one size fits all answer, and over time, guidelines change for better or worse. So the answer is, two years, may or may not be enough, dependent on a number of factors. However, you need a knowledgable person to help you with this. Good luck!
0 votes Thank Flag Link Mon Aug 5, 2013
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You may want to put together a well-written hardship letter. Many lenders want to know why a seller felt compelled to short-sale their homes or why the seller allowed their homes to go into foreclosure.

Typically, lenders want to see on-time payment of bills since these events and a 640 credit score.

Three years on a foreclosure and two years on a bankruptcy is what I am hearing are the usual requirements.
0 votes Thank Flag Link Sun Aug 4, 2013
I had a buyer that wanted to buy a home in Arizona, but he had a Chapter 7 bankruptcy 7 months ago. I introduced a loan program at http://www.cfsflex.com, they allow a mortgage after a foreclosure, short sale, or bankruptcy. There is only a six month waiting period. This is perfect for individuals looking to become homeowners again.
0 votes Thank Flag Link Sat Aug 3, 2013
Short Sale & Foreclosure Waiting Periods - Thanks to Lender Lonnie Glessner - 303-881-7317

The waiting period after a short sale or foreclosure varies by the type of loan.
1. A borrower getting a VA loan must wait 2 years from the foreclosure or short sale date before buying a new home assuming their previous loan was NOT a VA loan.
2. A borrower getting a FHA loan must wait 3 years from the short sale or foreclosure date BEFORE applying for a FHA loan. If their previous loan was a FHA loan the 3 year waiting period BEGINS when FHA paid out their insurance claim which is usually 6 months after the short sale or foreclosure date.
3. A borrower getting a conventional loan after a foreclosure must wait 7 years.
4. A borrower getting a conventional loan after a short sale or Deed-in-Lieu only has to wait 2 years IF they are buying their new home with 20% or more down.
4. A borrower getting a conventional loan after a short sale or Deed-in-Lieu only has to wait 4 years IF they are buying their new home with 10% or more down.
0 votes Thank Flag Link Sat Jun 29, 2013
A shortsale is still considered a foreclosure either way you paint it. It is just a less significant "ding" on your credit. Kudos to you for keeping your credit in order as it will help in getting a new loan. You have to wait a few years. Talk to a mortgage lender, that is your best resource. Here is a good resource on foreclosures and whom to talk to from HUD. http://portal.hud.gov/hudportal/HUD?src=/topics Good luck.
0 votes Thank Flag Link Mon May 14, 2012
When you did the short sale, the timeline was not defined yet in the underwriting standards. Basically, as soon as you could get your credit score back up, you would qualify for a new loan.

Warp to 2012. Every single month since your short sale, underwriting for conventional loans has become more strict (polar opposite from 2005 -2008). Short sales are now recognized as a serious risk although nowhere near foreclosure or bankruptcy.

I have been told 3 years past the date of "paid less than agreed" is on your credit report you can get a new loan. This is just for FHA - no idea of when you would qualify for conventional (probably longer).

This is far better than a bankruptcy for foreclosure in which 7 years is required.
0 votes Thank Flag Link Mon May 14, 2012
Thank you for your response... We have really been going back over all of our paper work, and digging for answers, and it is very clear that we did a "Short Payoff", to your knowledge would this make a difference in our ability to get a loan now, or do they still consider it a "Short Sale"?
Flag Mon May 14, 2012
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