Getting a mortgage after a short sale

The waiting-period grid

From the date the short sale closed:

• FHA: 3 years (or 0 years if borrower was current at time of sale — very rare)
• VA: 2 years
• USDA: 3 years
• Conventional (Fannie/Freddie): 4 years (2 years with documented extenuating circumstances)

Short sales are treated more favorably than foreclosures because they involve borrower cooperation and lender approval. Some conventional lenders will treat a current-at-time-of-sale short sale as a 'preforeclosure sale' with waiting periods matching a bankruptcy Ch. 7 (4 years).

How the credit-report code affects your file

The exact code the servicer uses on your credit report matters. Common codes:

• AK / 68 (settled for less than full amount): Standard short-sale coding
• DF (foreclosure): Sometimes incorrectly used for a short sale — dispute this if it happens
• PP (payment plan) with a settled balance: Best case, shortest waiting periods

Pull all three bureaus and confirm the code before assuming your waiting period. A misreported foreclosure can add 2–5 years to your wait.

How to build a strong post-short-sale file

1. Establish 3+ tradelines within 12–18 months of the sale.

2. Zero housing lates. If renting, pay on the 25th every month — never risk a 30-day late.

3. Save reserves equal to 3–6 months of target PITI.

4. Keep a paper trail of the cause. Underwriters give real credit to a documented one-time event (job loss, divorce, relocation) versus general financial stress.

5. Consider re-establishing a housing tradeline via a family loan documented via a formal note. Some manual-underwrite files benefit from a documented 12–24-month rental or family mortgage.