Can I get a mortgage after a short sale?

You avoided foreclosure but had to sell your home for less than you owed on it. Will you ever be able to qualify for another mortgage loan?

Yes, but you may have to wait. Your credit score suffers after a short sale, although not as much as if you’d gone through foreclosure, and you may need to rebuild credit and endure a waiting period before you apply for another loan. The length of that period depends on the lender, your financial situation and the type of loan you’re interested in.

For conventional loans

If you’ve sold your home short, you usually need to wait at least two years before you can qualify for another mortgage—that can be with a 20% down payment. With a smaller down payment, your wait may go up to as many as seven years.

For Federal Housing Administration loans

There’s typically a three-year wait from the close of your short sale to the time when you can apply. At that point, you’ll likely be treated the same as any home buyer who qualifies for an FHA loan. These products offer the shortest wait if you’re having trouble scraping together a significant down payment.

A lot depends on what happened

Lenders may follow rules regarding who can qualify for a mortgage loan, but the circumstances under which you ended up doing a short sale does matter. A borrower who was forced into a short sale—due to a job transfer, for example—will be viewed as less of a risk than an applicant who saw the declining market and chose to dump his mortgage.

Rebounding from a negative credit event, such as a short sale, isn’t easy. But if you wait the required time, carefully manage your finances and follow the advice of your lender, you could find yourself closing on a mortgage loan you can afford.