The waiting period after a short sale is generally shorter than after a foreclosure. FHA requires 3 years, VA 2 years, Conventional 2-4 years.
Short sales are viewed more favorably than foreclosures because you worked with the lender to resolve the debt. This can result in a shorter waiting period.
Extenuating circumstances may allow for shorter waiting periods with some loan types.
Waiting Periods
FHA: 3 years from short sale date. VA: 2 years. Conventional: 2 years with extenuating circumstances, 4 years without. USDA: 3 years.
Extenuating Circumstances
Same extenuating circumstances apply: job loss, medical emergency, divorce, or death of breadwinner. Document the circumstance thoroughly.
Credit Rebuilding
Follow the same credit rebuilding plan: on-time payments, low utilization, secured credit cards, stable employment, and savings.
Documentation
Documentation needed: short sale approval letter, HUD-1 settlement statement from the short sale, evidence of extenuating circumstances, and re-established credit history.
FHA Advantage
FHA offers the most predictable path after a short sale. The 3-year waiting period starts from the short sale completion date.
Tips
Short sales are less damaging than foreclosures. The waiting periods are shorter. Work with a lender who understands short sale guidelines.