Waiting Period after Short Sale or Foreclosure

How Soon Can I Get a Loan

One of the questions clients often ask me is “How long do you have to wait after you go through a short sale or a foreclosure to qualify for a new loan.  Although I do not do loans, I know the answer is “it depends.”   I hope the following information furnished by Dan Dobbs of American Commerce Mortgage will help answer some of your questions.  In addition, you should always consult your own tax advisor and attorney before starting a short sale or foreclosure on your San Diego North County home.

There is much “mis” information regarding the length of time borrowers are required to wait between the final date of the foreclosure / short sale and the date the new escrow opening.

Wait periods can be as short as 2 years or as long as 7 years.

What contributes to the confusion….are the additional “overlays” (additional underwriting criteria) for each specific investor.

Criteria are different for “conventional” loans vs. FHA/VA loans.

For both types…..what determines the “wait time” is your buyer’s (i.e. former “short seller”) circumstances at the time of the sale?

Specifically….what were the “extenuating circumstances” that can be clearly documented. (The “burden of proof” will clearly be on the buyer and there is USUALLY more than just ONE circumstance)!
Examples of extenuating circumstances are:

1) Job loss job in a specialized field and what caused the extended period of time to find a new job.

2) Significant health issues for borrower or close family member.

3) Death /illness of close family member PARTICULARLY if the victim is a signatory on the loan. (must provide medical records and/ or death certificate).
Strategic Defaults

Strategic Defaults

Buyers are NOT eligible for a new FHA- INSURED MORTGAGE ….if they pursued a short sale agreement on their principal residence simply to:

1) Take advantage of declining market conditions


2) Purchased at a reduced price…a similar or superior property…within a reasonable commuting distance.

In other words if your buyer engaged in a “strategic default”…they can kiss off any FHA financing for the foreseeable future.

Buyers seeking “conventional financing” who previously “strategically defaulted” currently have up to a 7 year wait period before they are eligible for financing.

For information on San Diego North County homes, contact Gary Harmon, your Real Living Lifestyles Realtor.