Buying After Short Sale Waiting Period Extended

by on 10.5.15 in Home Mortgage News

Buy Again After A Short Sale – And Have 20% Down

Last week Fannie Mae announced a couple of really big changes to the waiting periods required to purchase a home after a financial hardship that resulted in either  Foreclosure, Short Sale or Deed in Lieu of Foreclosure.  I wrote about Fannie Mae Waiving the Waiting Period for Foreclosure Included in Bankruptcy, which was a completely unexpected addition to this latest update.

Unfortunately, the ability to use the Bankruptcy date instead of a subsequent foreclosure date, does not appear to include pre-foreclosure events such as Short Sale or Deed in Lieu of foreclosure.

This was a nice change in policy that seems to be opposite of the simultaneous news that Short Sale or Deed in Lieu waiting periods are being extended.

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While we did have advance notice that Conventional waiting times were going to be increased, this recent update filled in some of the details and timeline for when everything goes into effect.

What Changed

For the past few years, Fannie Mae has treated pre-foreclosure events, Short Sale or Deed in Lieu of Foreclosure, differently than a foreclosure.

How to buy again after a real estate short sale using a conventional loan


If you had a 20% down payment, and a minimum 680 credit score, you were able to buy in only 24 months from the completion date of the short sale or deed in lieu.  For any loan applications taken after August 16th, 2014 this option goes away.

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This is really the only change that could be construed as having a negative effect on new home buyers trying to get back into the market after a pre-foreclosure event.

If you had less than a 20% down payment, you could purchase using conventional financing with only 10% down, 4 years after a short sale or foreclosure with a minimum 680 credit score.

What’s New

The reaction to the several changes announced by Fannie Mae on July 29th seems to be overwhelmingly discouraging.  I have a different take on it, I mean, yes it’s kind of a bummer that you can no longer put 20% down and buy in 24 months, but all of the other changes are actually a loosening of current guidelines.

If you’ve had a short sale or deed in lieu, the waiting period before you’re eligible to buy with conventional financing has been moved to 4 years.

However, the 4 year waiting period does not appear to come with the same loan to value and credit score restrictions as did the previous guideline.  If this is in fact true, that means that any homebuyer with a short sale or deed in lieu can buy in as little as 4 years with a minimum 620 credit score, and 5% down payment.

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This change takes place for all applications taken after August 16th.  We might have to wait until August 16th, when Desktop Underwriter (DU) is updated, to see what limitations might be applied, if any.

Other Waiting Periods You Should Know

Conventional waiting periods after pre-foreclosure are still significantly better than the 7 year wait after a foreclosure that was not discharged through bankruptcy.

Here’s a quick overview of other Waiting Periods you should be aware of:

Buy After Bankruptcy 

  • FHA Financing – 2 years from discharge after Chapter 7 / 1 year after Chapter 13 discharge
  • Conventional Financing – 4 years from discharge ofr Chapter 7 / 2 years from discharge of Chapter 13
  • VA Financing – 2 years from discharge after Chapter 7 /  Chapter 13 payments made for minimum of 12 months

Buy After Foreclosure

  • FHA Financing – 3 years from date title transfers out of your name
  • Conventional Financing – 4 years from BK discharge if included / 7 years from title transfer if no BK
  • VA Financing – 2 years from title transfer out of your name

Buy After Short Sale or Deed in Lieu

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  • FHA Financing – 3 years from date title transfers out of your name
  • Conventional Financing – 4 years from date title transfers out of your name
  • VA Financing – 2 years from title transfer out of your name


I live in Massachusetts. The information you provide here is very helpful. I have to admit the frustration level I have about short sales is beyond what I ever imagined happening. I am not looking for pity as I defaulted on my loan. Bottom line. My husband and I bought our condo in 2004. We were young and naive. We fell for the "come let us give you a loan and put no money down. We will just give you an 80% mortgage at 6% interest and a second mortgage of 20% at 8% interest." We were promised that we would be able to refinance within a few years and not to worry about the fact that the second mortgage would balloon. Being naive (like I said before) we were blinded by the excitement of buying our new home. Well, the market plummeted and we all know where that left all of us....upside down. My mother in law became ill, my father in law became ill, my brother committed suicide, and a plethora of sad soppy events occurred. On the upside, two beautiful children were brought into this world as well but with one problem...we had two bedrooms. We tried to refinance but were told "Sorry we can't help you as your property is not worth the amount you need to refinance." After a lot of praying and tears the best option we were convinced that would be best for us to do would be to short sale our condo. After 2 years on the market it finally sold. September 10, 2013 was the date of our names being replaced by the new owners in the house of deeds. We were under the assumption that if we worked on our credit for a while we could try to get a mortgage in as little as 2 years. We decided to try our luck today (5 months shy of our two years) and learned of the disheartening news that "We would love to help you but we simply can't" from the few places we went to. Again, not looking for pity, but my husband and I make enough money and have such little debt that we would qualify for a loan (or so we were told by one of the banks we went to today) but that short sale has their hands tied until our 3 year mark. We are good, hard-working people who were naive and uneducated when we bought our first home. I hate that we, among many other middle class Americans, are being punished longer for not only our mistakes but also the mistakes of lenders back in 2004 (who we were told today that the loan they gave us is illegal now). 


Hi Scott, I don't know if you can help me as I am in Las Vegas, NV.  I short sold my home in February 2012 and I was lucky and purchased my new home in April 2014.  I also have owned a rental home in MN since 2001.  I am coming into some money and was hoping to invest (30-50% down) in another rental property but I was just told by a local lender that now I have to wait the 4 year period.  I find this so hard to believe that there is not another option available given that I already own two properties.  When I short sold, it was due to a loss of a wage (which I understand could be an exception).  Aside from hard money, are there any other options?

ScottSchang moderator

@snoopy_san I am not finding anything in the Fannie Mae seller guide that would indicate that extenuating circumstances are limited to the purchase of a primary residence.  

I would talk to another lender maybe and get a second opinion.  If you were able to qualify for a conventional loan in April 2014, I do not see any reason why you could not also qualify for the purchase of an investment property.

Unfortunately, I am unable to lend in NV, but if you shoot me an email (address in author profile above) I can refer you to someone I know and trust that does.

Hope this helps?

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