How Long Do You Have to Wait to Buy Again After a Short Sale?

Waiting Periods After a Short Sale or Foreclosure

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David Sacks / The Balance

If you've lost your home through a short sale, foreclosure, bankruptcy, or a deed-in-lieu of foreclosure, it doesn't mean you'll never be able to buy again. It will take time, however, to qualify for a conventional loan from a reputable lender.

Learn how long it will take to buy a house after a short sale or foreclosure.

Waiting Periods After a Short Sale or Foreclosure

A conventional loan is a loan that's not part of a government program. For example, FHA loans aren't conventional mortgages because they're guaranteed by the Federal Housing Administration. Many conventional loans are backed by Freddie Mac or Fannie Mae.

Fannie Mae

Fannie Mae has established a series of waiting periods for borrowers depending on the type of "derogatory credit event" they've experienced. These are the guidelines:

  • Buying after a foreclosure: Seven years
  • Buying after a foreclosure with extenuating circumstances: Three years
  • Buying after a deed-in-lieu of foreclosure: Four years
  • Buying after a deed-in-lieu of foreclosure with extenuating circumstances: Two years
  • Buying after a short sale: Four years
  • Buying after a Chapter 7 bankruptcy: Four years
  • Buying after a Chapter 13 bankruptcy: Two years from the discharge date or four years after the dismissal date

Freddie Mac

Freddie Mac also has waiting periods for borrowers, and they have shorter waiting periods if you had extenuating circumstances.

  • Buying after a foreclosure: Seven years
  • Buying after a foreclosure with extenuating circumstances: Three years
  • Buying after a deed-in-lieu of foreclosure: Four years
  • Buying after a deed-in-lieu of foreclosure with extenuating circumstances: Two years
  • Buying after a short sale: Four years
  • Buying after a short sale with extenuating circumstances: Two years
  • Buying after a Chapter 7 bankruptcy: Four years
  • Buying after a Chapter 13 bankruptcy: Two years from the discharge date or four years after the dismissal date
  • Buying after any type of bankruptcy with extenuating circumstances: Two years
  • Multiple bankruptcy filings in the past seven years: Five years

In addition to the waiting period, some loans require a minimum 10% down payment and a minimum FICO score. The home you purchase must be your principal residence (not a rental property or a vacation home).

Extenuating Circumstances

Fannie Mae defines extenuating circumstances as "nonrecurring events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations." This might include job loss, divorce, illness, or the death of a wage earner.

Similarly, Freddie Mac defines extenuating circumstances as "a nonrecurring or isolated circumstance, or set of circumstances, that was beyond the Borrower's control and that significantly reduced income and/or increased expenses."

Waiting periods can be drastically shortened if there are extenuating circumstances, but you'll need documentation to prove the event. For example, being unable to afford an interest rate increase on your adjustable-rate mortgage is not considered a circumstance beyond your control.

Other Loan Programs

FHA loans have less stringent waiting periods: three years for buying after foreclosures, short sales, or deeds-in-lieu of foreclosure, and one to two years for bankruptcies. The FHA will waive the waiting period and allow you to borrow immediately in some short sale situations if you weren't in default on your mortgage and you had at least one year of timely payments.

These government-backed mortgages tend to be more expensive, however, with higher interest rates and the requirement that you carry mortgage insurance.

VA loans have even more lenient requirements. You can be eligible two years after a foreclosure, two years after a Chapter 7 bankruptcy, and one year after a Chapter 13 bankruptcy. Some lenders have no waiting period after a short sale.

Some private banks will make portfolio loans the day after a short sale has been completed if borrowers qualify.

The Bottom Line

A short sale, foreclosure, or bankruptcy is a stressful event, but it's one you can recover from. With time, you can even buy a home. If extenuating circumstances like divorce, medical bills, or job loss, led to your short sale or foreclosure, the waiting periods can be very short.