Buying a Home After a Short Sale? 5 Things You Need To Know Roger Odoardi Buying a home after a short sale is not impossible. Yes, it’s true: the cards may be stacked against you. But getting a home loan after going through a short sale is very much achievable. Before we get into the reasons why buying a home after a short sale is indeed possible, let’s define what a short sale is and why it matters in the home mortgage business. A short sale occurs when a homeowner decides to sell their home for less than the amount they owe the mortgage company, meaning not all of the liens or debts associated with the property have been settled. If this is the case, the seller is still responsible for the outstanding balance on those debts. Sometimes a homeowner does this when they need to move and they owe more than the house is worth. Other times, a homeowner may try to sell their home through a short sale in order to avoid a foreclosure, which is when the lender takes over ownership of the home. Now that we’ve defined what a short sale is and why it happens, let’s go over some of the most important things a person should know when trying to buy a home after a short sale. Believe it or not, there are steps a homebuyer can take to qualify for a loan in order to buy a house again after a short sale. Here are a few of them: It’s going to take time A short sale will most likely prevent you from getting a new home mortgage loan right away. The amount of time you must wait before applying for a new mortgage loan depends on the type of lender and your financial circumstances. For example, if you’re applying for a FHA loan after a short sale, you may not have to wait at all — but only if you were not in default prior to the short sale and you maintained a pristine history of paying your mortgage, as well as other debts. The waiting time changes, however, when looking at the size of the down payment for your new home, as well as whether you’ve defaulted on your previous loan or if your credit is in shambles. Be patient. Your credit is key If you’ve gone through the short sale process, chances are your credit took a pretty substantial hit. But, if you’ve done all you can to triage the beating your credit score took, not to mention remained current on all other bills and financial obligations, a new home loan after a short sale is most definitely in your future. Luckily, there are many ways a homebuyer can begin to repair their credit after going through a short sale. Don’t fall victim to a mistake Just like you would try to ensure your credit history is accurate and in good shape, it’s important to make sure that your previous short sale was reported accurately. An all too common mistake involves a servicer incorrectly reporting a short sale as a foreclosure to credit bureaus. This is bad news because a foreclosure on your credit report will likely mean having to wait MUCH longer to qualify for another mortgage. Ensure accuracy by checking and double-checking how the short sale was reported on your credit report. Also, be sure to keep documentation of the short sale, just in case you have to prove that it was reported incorrectly. Being proactive pays off Understanding that it’s not that easy to get a new loan after a short sale, take advantage of this time by working on the things in your life that led to the short sale in the first place. The transition time between mortgages offers an opportunity to save for another down payment, as well as clean up any of the credit issues. Force yourself to take care of all of the things you can to prove to your underwriter that you did your best. It’s OK to ask for help Because you’re likely still worn out from the short sale process, why not let someone wade through what it takes to get a new mortgage for you. There can be many moving parts to qualifying for a new home loan after a short sale, which is why you should allow an expert to lead you through this complicated process. We recommend engaging a mortgage broker when ready to buy, explaining to them your situation, and then setting up a series of goals prior to applying for that new home mortgage. At Blue Water Mortgage, our team of professional mortgage brokers is capable of helping you get qualified for a new home loan – no matter if it’s after a short sale, foreclosure or what have you. Read more about how you can repair your credit before applying for a new mortgage, or contact one of our brokers with a specific question. With over 150 years of collective mortgage experience, we know what it takes to close a deal. Roger Odoardi Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.