Frederick County Short Sale Blog | Homes for Sale in Frederick Md

How Soon Can I Buy A Home after Foreclosure? Short Sale?

Many people are finding themselves in a tough situation after a job loss or salary cut and have ended up short selling their home or worse, going through a foreclosure.  There is hope after a distress sale, people can buy a home again.  Here is a general guideline I received from a regional Wells Fargo Lending Supervisor:

In the best-case scenario:

VA and FHA:  Foreclosure:  A buyer can get another mortgage in 2 years from the date of completion of the foreclosure.

Short Sale:  A buyer can get another mortgage in 2 years.  If they were late on a payment, FHA looks at the short sale as if it was a deed-in-leu of foreclosure and the new loan will be manually approved, given the best-case. 

In a Short sale, if the buyer was never late on a payment, they can buy another home immediately, as long as their credit scores are good and as long as they don't buy a superior house. They have to have good extenuating circumstances, like a job relocation, which has to be outside a 100 mile radius.  Divorce is not an extenuating circumstance.

Conventional:   A lender of a conventional loan looks at a short sale like a deed-in-leu and the buyer can get another mortgage in 4 to 7 years, depending on payment history after the sale, credit score must be a minimum of 680. 

In the best case, the buyer can get a new mortgage in 2 years, but must have documentation showing extenuating circumstances. Again, divorce is not an extenuating circumstance, it is considered "financial mismanagement"

What is "the best-case scenario"?

The buyer must have built their credit score back to a minimum of  680, must have documentation of extenuating circumstances, ie. job loss, illness, etc. In the case of a foreclosure, building the credit score back to health takes more time than a short sale, because there can be as much as a 300 point difference in the credit score.  It is much easier and takes less time to repair a credit score after a short sale, another good reason to go through the hassle and work to avoid foreclosure.

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Chris Highland has a CDPE certification, Certified Distressed Property Expert.  If you or someone you know is having trouble making their mortgage payment through financial difficulty like job loss, illness or rate adjustment, give us a call.

The Highland Group