Buy Again Sooner after Short Sale or Deed in Lieu of Foreclosure?

NOTE:  These guidelines were changed in August, 2014 – See new guidelines here

You can buy again sooner using Fannie Mae conventional home loan financing if you avoided foreclosure of a previous home through a short sale or deed in lieu of foreclosure.

Buy Again After Short Sale / Deed in Lieu of Foreclosure
TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment

FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

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There may be additional closing costs to offset the added risk of reducing the waiting period, and this may also vary from lender to lender.

Buy Again after Deed In Lieu Using A FHA Loan

How to buy again after a deed in lieu of foreclosure using an FHA loan


The good news is that it’s POSSIBLE

Possible doesn’t mean it’s going to be easy.  One of the conditions of being able to buy again sooner  is that the short sale or deed in lieu of foreclosure is properly reported on your credit report.

This is important because Fannie Mae uses an automated underwriting system called DU or Desktop Underwriter.  Because this is an automated underwriting system, it will import your credit report and make a decision based only on what information is reported.

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If items are reported in error, it could cause a false decision – on the other side, if items are excluded from your credit report (like the fact that foreclosure was avoided) this will also result in a false decision.

Also, it is not uncommon for investors like Fannie Mae to “allow” loans with exceptions or unusual conditions such as this, and many times they allow it with additional costs or restrictions to lenders, which means that sometimes these types of loans are not widely available and therefore it’s difficult to get information about them.

Do you have 10% to 20% down payment?

If you’ve worked hard to re-establish your credit and saved up enough money for a down payment, this should be great news!  I would like to think that I do a pretty good job of staying on top of changes in the industry, but honestly, this one slipped by me for a couple of months.

If you think you may be eligible to buy again after short sale or deed in lieu of foreclosure and have a 10%-20% down payment, leave a comment below, drop me an email, phone call or chat live with a specialist here on the site.

Visit this article for more information about Buying Again after Bankruptcy, Short Sale or Foreclosure

  • sidcarol I know we spoke personally, but I want to address this in the comment thread in case anyone else has a similar question or experience.
    As you can see by your credit scores, time cures most things, especially things that are being reported inaccurately.
    The fact that 120 days late shows up on your credit report will not result in a lender denying you for financing, but it will raise questions.  
    Most lenders will ask for a LOE, or Letter Of Explanation regarding the deed in lieu.  Dig up your DIL paperwork showing that you are signing over title in exchange for extinguishing the lien (which is what a deed in lieu is).
    As far as JFCU turning you down, that sounds to me like it’s their own decision.  Under the circumstances discussed in the article, Fannie Mae will allow you to buy in 2 years following a Deed in Lieu as long as you meet the equity and credit score requirements.
    Hope this helps?

  • sidcarol

    My situation is that my husband and I filed for DIU in Feb of 2011 but our reports are showing 120 days and the loan of the house was paid off on two reports and still showing on one report.  My husband and I are separated now and I’m trying to clean up my credit to possibly buy again this year.  My lowest credit score is 694 with Equifax, 734 with TransUnion and 739 with Experian.  It looks like the credit files have July as being the last day of the DIU.  How is this possible when we filed in February and the 120 days which would mean payments missed from Feb to May 2011.  I’m concerned because I need to be out of my apt in August of this year and do not want to rent again.  Way too expensive.  How can I purchase and what types of loans would I qualify for.  I also tried to get a preapproval to see where I stood credit wise and my JFCU turned me down because of the deed in lieu staing I have to wait 4 years.  They use Fannie Mae, which I read was ONLY 2 years waiting time?  Help, I need direction and clarity.

  • kmbrlycc

    Hello Scott,
    I had filed for bankruptcy in October of 2010 after a job loss in 2008. I was struggling but the house value dropped so low and my attorney advised filing for a BK, which I did.  My mortgage was included in the BK with a small second (home equity loan).  that was discharged in January 2011.  I have been in my home and still am.  I have not made a mortgage payment since. I finally got a full time permanent positon in 2012. It pays enough to meet my student loans and car payment but not enough to pay my mortgage and I had already appealed to my mtg company four times previous to working with me on a loan mod. they refused. Anyway, I checked my credit report and in the middle of 2012 it showed my mortgage loan as closed, but I continued to get statements monthly for my house payment and called each time I had to change my contact info to the mortgage company.  I finally have found a buyer for my house and they have submitted the offer. My question is, since my credit report shows my mtg loan closed and my bk discharged, when will I be able to think about buying a house?  Does the credit report get another knock with the shortsale if it goes through?  Am I off the hook for this mortgage if it goes through andmy name is taken off of the paperwork for good? I have no idea where I stand. Thanks for your anticipated answer. Hope I was clear enough for you to answer me

    • @kmbrlycc Ok, here’s where you stand.  The bankruptcy would cause the mortgage to no longer show up on the credit report, but it’s still a defaulted mortgage.  The bankruptcy protects you from any legal or financial liability that could result from defaulting on the mortgage, but as you know, you still own the home.  If the bank agrees to allow you to short sell the home, you will have a waiting period before you are eligible for financing again.  As the guidelines stand now, you could buy as soon as 2 years using conventional financing with 20% down payment and a minimum 680 credit score (you would have cleared the conventional 4 year waiting period by that time).  With FHA, you can buy again in 3 years.  Keep in mind, both of these options require that you re-establish good credit and can show that the circumstances that led to the BK/Short Sale are not likely to happen again.  Full time employment and no late payments would be that proof.
      Hope this helps?

      • kmbrlycc

        Thank you for the information.  I spoke to a Real Estate Attorney who said that I could buy again as early as Janaury 2013 with good credit through FHA and had my name removed from the mortgage (short sale).  He also stated that FHA would allow me to buy sooner where you are saying that a conventional loan may let me borrow for a home in as little as two years.  .that doesn’t jive. Please explain..maybe I read a typo?
        Further, how does that short sale show a judgement on my record?  Since the mortgage loan shows “closed” is the mortgage company allowed to open up that category again on my credit report or does it show up as something else?  How am I to know if the lender sees a different report than the one I do?  Sorry for so many questions, but I have to know all of this.  P.S. I live in MIchigan..are the rules different here?

      • @kmbrlycc I’m not sure what timelines the attorney is referring to, and guidelines were different in 2008 than they are today.
        It was not a typo – Conventional allows you to buy (with re-established credit) in 2 years from a short sale or deed in lieu of foreclosure.
        The short sale will not affect your credit.  The mortgage liability as far as the lender is concerned was discharged during the bankruptcy.  The short sale is a matter of public record and will be disclosed by you on the a new loan application.  
        The short sale would be a matter of public record and will be discovered during the underwriting process.  It’s not necessarily a “credit” issue, it’s an “underwriting” issue.  How the mortgage is reporting on your credit report is not relevant in the underwriting decision since it was discharged in the bankruptcy and most likely isn’t (currently) reporting at all.  
        These guidelines are for FHA and Conventional loans and do not change from State to State.

  • kmbrlycc

    Hello Scott,
    I had filed for bankruptcy in October of 2012 after a job loss in 2008 and continuing to struggle but paid my mortgage till the fileing of the BK.  My mortgage was included in the BK with a small second (home equity loan).  that was discharged in January 2011.  I have been in my home and still am.  I have not made a mortgage payment since. I finally got a full time permanent positon in 2012. It pays enough to meet my student loans and car payment but not enough to pay my mortgage and I had already appealed to my mtg company four times previous to working with me on a loan mod. they refused. Anyway, I checked my credit report and in the middle of 2012 it showed my mortgage loan as closed, but I continued to get statements monthly for my house payment and called each time I had to change my contact info to the mortgage company.  I finally have found a buyer for my house and they have submitted the offer. My question is, since my credit report shows my mtg loan closed and my bk discharged, when will I be able to think about buying a house?  Does the credit report get another knock with the shortsale if it goes through?  Am I off the hook for this mortgage if it goes through andmy name is taken off of the paperwork for good? I have no idea where I stand. Thanks for your anticipated answer. Hope I was clear enough for you to answer me.

  • InLimboInSanDiego

    Great information here! Here’s our situation. Clean short sale April 2010, but DU is reporting refer/caution and we don’t know what needs to be fixed. Lender can’t do a manual underwrite and can’t really help much further. The credit reporting agency used is reporting an MOP 9 for both our first and second mortgage, and they’re saying its coming from Experian. Equifax and Transunion is reporting a 5 (120 days late). From our research, Experian has their own definition of a 9, but the agency is just reading that 9 verbatim and not really caring about its true meaning. Is this 9 causing the “refer caution”? We also notice the Report Date is showing up as 5/11 with “OK” payments through 5/11, but close dates are all 4/10. No one is willing to fix the 9 and we’re trying to get the payment status updated, but we’re not sure what actually needs to be fixed. Are you familiar with our situation, or have any suggestions? Thanks!

    • Yes, I’m familiar with this situation. a “9” means foreclosure and it appears the credit bureaus are reporting the disposition of your previous mortgage incorrectly.

      To fix this, we would need to get documentation from your previous lenders stating the the home was settled as agreed for less than the amount owed. We can send this to the bureaus and request that they correct the reporting. This process is called a rapid rescore.

      Feel free to give me a call in the morning on my cell phone if you would like to discuss this further – 714-336-8286

      I assume you have a minimum 680 credit score and 20% down payment?

      • InLimboInSanDiego

        Thanks for the reply, and I just left a voicemail for you as well. To start off with yes, our credit scores are hovering around 700, and we do have 20% down.

        After about 3 weeks of calls between the Experian bureau and credit agency, it doesn’t appear to be a creditor reporting issue. As mentioned Equifax and Transunion are both reporting a 5, but Experian is reporting a 9. They explained that their 9 is not the same MOP 9 as “foreclosure” but instead they report a 9 but also have subcodes. I think the standard actually is 8 for foreclosure, and 9 for charge/off/collections. According to them, our report under them, shows no foreclosure, chargeoff, or collections, but instead their 9 means “settled”, which is accurate. Therefore, any dispute to the creditors wouldn’t really help, since at least to them they have accurate reporting of a short sale settled for amount less than owed.

  • Phil

    Hi Scott,

    Great info. I have a question about our situation. We relocated for work and had to short sell our house. The transfer of ownership occurred in Oct. 2008. After the short sale was completed, Wells Fargo proceeded to sue us for a deficiency judgment, which forced us into chapter 7 bankruptcy. The chapter 7 was discharged in Nov. 2009. Based on the FHA guidelines, we have applied for a mortgage (FHA) and were pre-approved and sailing through until underwriting got a hold of it 3 weeks before closing. They are saying that the deficiency judgement filed after the short sale was completed counts the same as foreclosure proceedings, therefore we have to wait until 3 years after the bankruptcy was discharged. In reading the HUD guidelines, it clearly states that the waiting period of 3 years (for a short sale with late payments, which was the only way we could get them to consider the short sale!) begins the day deed is transferred to the new owner (Oct. 2008) and the waiting period of 2 years begins at the time of chapter 7 discharge (Nov. 2009) meaning we are currently eligible. Am I correct? We are without a place to live in 3 weeks if we cannot get this resolved. I think their underwriter is misinterpreting the HUD guidelines. Thanks for your help!

    • This is curious Phil, the short sale would have extinguished the debt. I agree with you that the underwriter is misinterpreting the guideline.

      Keep fighting this and try to escalate to a senior underwriter. Ask them to produce the FHA guideline that states the mortgage debt can survive a short sale. By asking them to produce the guideline may force them to find the correct answer. In the meantime, find another lender!

  • Lynne

    Hi Scott

    My husband lost his job and we were foreclosed on. We missed payments but sold our home before the sheriff’s sale and Wells Fargo dropped the foreclosure suit. Our mortage was paid in full, but we settled our equity line (we brought money to closing and they forgave the rest). Is it still considered a short sale if only the equity line was short? We want to get an FHA loan and wonder if we have to wait the three years from date of sale of house 10/09? WE ONLY HAVE 3.5% down, but our only debt is a $487 car loan and husband has a new job paying 160K per year. He had a job paying 115K for the past three years, as well. Thanks for your help!

    • Hi Lynne,

      Technically, there was a short sale on the second trust deed, but it really just depends on how the lender reported it on your credit report. If they reported it as paid in full, you should be ok – if they reported it as paid in full for less than amount owed – you would have to wait until 10/12 to buy again using FHA. Sounds like other than the waiting period, you’re in good shape?

      If you’re in California, we are a direct lender – we can look into the credit report and see if there’s an opportunity for you to buy sooner. If not, I may be able to recommend someone I know and trust in your State.

      Hope this helps?

      • Lynne

        The equity actually reported it as a collection/chargeoff (paid). What bothers me even more is Experian is reporting our first mortage as a foreclosure, even though we paid them every single penny that we owed them. How can they do this? I am thinking I should dispute this with them. Our county clerk of courts has it in the public records that the foreclosure suit was dropped and we paid the account in full. I am in Ohio, by the way. Thanks for your help.

      • It’s not unusual for there to be reporting errors on credit reports – you can dispute the item but in reality it will have little to no affect on your credit after 12 months. Go to Experian online and order a copy of your credit report – don’t sign up for any monitoring or protection or any of that stuff, it’s pretty much a scam – order a copy of your report and dispute the item that is reported incorrectly. They should fix it.

        Because of the second mortgage, you could buy in October 2012, 3 years from the short sale on the second mortgage.

  • Albert

    My wife and I completed a shortsale in the southbay in 12/09. We were able to get a preapproval and are now having trouble with the desktop underwriting. It seems Experian reports when our loan started the foreclosure process. Even though it also states that the loan is settled for less than the amount owed, its causing the desktop software to see it as a foreclosure. Have you seen anything like this before?

  • Anthony

    Hi Scott. First thank you for posting all of this information. I want to know if my wife and I will be able to buy a home soon. Background–My primary home sold via short sale in March of 2010. I had a second loan which I settled with the bank for less than owed. I paid cash. We also short sold a income property and it closed in May of 2010. I have re-established my credit. My scores are 695-768-701. I have the 10-20% down. May of 2010 was the finalization date for everything. Do you have any advise? I was just told by my bank, I would have to wait a minimum of four years! Additional info– The primary loan was recorded as a deed in lieu and not a short sale. My credit shows FR or foreclosure redeemed.

    • Anthony,
      I am finding that not all investors are following Fannie Mae guidelines regarding buying again in 2 years after short sale or deed in lieu. We are able to sell those loans to two different investors so we are able to provide that financing in California. 4 years is the waiting period for bankruptcy discharge under fannie mae guidelines – was there a BK at any point prior to or during the short sales? That would explain the 4 year waiting period quoted. Also, what is the loan amount? This would only apply for loans under fannie mae conventional loan limits.

      Also, if your previous lender reported the deed in lieu or short sale incorrectly on your credit report, we would need to correct that. The fannie mae guideline that allows you to purchase in 2 years with a minimum 680 credit score and 20% down payment applies to both short sale and deed in lieu. As long as it was a pre-foreclosure event.

      Hope this helps?

  • Lora L.

    Bankruptcy discharged 03/2010. Continued to make payments for a year. In the mean time the company I worked for was sold. The new employer was going to relocate us so I put my house up for short sale and received an offer. While wiating for the bank to approve my employer decided to close. I decided to continue with the short sale as it was now a hardship. I’ve since found a new job and would like to now by another home. Where does this leave me? Would I be eligible for a mortgage this year?

    • Hi Lora,
      Did you fall behind on the payments prior to the short sale? There may be a case here extenuating circumstances that led up to the short sale if you did not fall behind on the payments. If you did, you would eligible to buy again two years from the short sale date with a minimum 680 credit score and 20% down payment. Your bankruptcy “waiting period” of 4 years should also be up by then. If you don’t have the 20% down, and if you fell behind on the payments prior to the short sale, you may be eligible again in 3 years from the short sale date with 3.5% using FHA financing.

  • Gary

    Thanks in advanced for any info Scott!
    My situation:
    –Short sold in Jan-2010.
    –No late payments.
    –My credit score is 730.
    –I have no debt and consistent income
    –I have 20% for a down payment.

    I’ve been getting conflicting information from various sources about when I can buy again. One mortgage broker has spoken with several originators and has pre-approved me for an FHA loan. Is this possible or a mistake?

    I’de rather get a conventional loan. I’ve been reading that Fannie Mae may allow for a loan after 2years and 20% down. Is this true and if so any suggestions on how to find a Fannie Mae lender willing to work with me.

    • Hi Gary,
      I see no reason why you couldn’t qualify for conventional financing right now. FHA actually requires 3 years from short sale, so I’m not sure where the FHA approval is coming from. One of the possible reasons is that you can get an automated approval, especially since you didn’t have any late payments – the challenge comes from inexperience originators that don’t fully understand the underwriting findings – an underwriter would be instructed to manually input any factors that the credit report didn’t pick up, such as a short sale.

      Any lender should be able to offer you a conventional loan, it’s just that many may not have dug as deep into the underwriting guidelines as I have had to while researching this topic.

      What state are you in? If you’re in California, I am a branch manager of a direct lender and we would certainly take a run at this. If you’re not in CA, I may be able to recommend someone I know and trust in another state.

      I see no reason why you can’t buy now. Hope this helps.

      • Gary

        That sounds hopeful. Particularly since I’d rather get a conventional loan. As far as the FHA loan goes this document here leads me to believe that it is possible to get a FHA loan 2-years after a short sale. Is it just that lenders do not do this in practice?

      • Gary
      • Gary

        Maybe I read that wrong. I guess it didn’t say anything about time frame.

      • You didn’t read it wrong Gary, FHA will actually allow you to buy 1 day out of short sale if it meets all of that criteria. The challenge has always been in meeting the criteria for getting the exception as it is much more strict than how they describe it. If you meet the definition of extenuating circumstances, and if the lender settled as paid in full for less than amount owed with no additional note securing securing a portion of the balance, you may have a shot at FHA here – either way, your conventional route is also a viable option at this point I believe.

  • Hugo Ledesma

    Hi Scott, I had a short sale February 2010 on a FHA loan and now looking to purchase a new home. I was told that I would have to wait 7 years before I can get another FHA loan again and that my only chance is to get a conventional loan with 20% down. The answers that I’m seen here do not reflect is they had FHA loans in the past. So my question is can I get a new FHA loan after 3 years if I defaulted on a previous FHA loan? Oh and I really like this site it is very helpful thank you for your time.

    • Hi Hugo,
      No, you do not have to wait 7 years. While it is true that you can buy using conventional financing in 24 months with a minimum 680 credit score and 20% down, you can buy using FHA financing in 3 years with 3.5% down and a minimum 640 credit score. FHA does not discriminate as to whether or not the short sale loan was insured by FHA.

      Hope this is good news?

      • Hugo Ledesma

        Thank you Scott, this helps me a lot and will make my wife hapy to hear this.
        Thank you again and keep up the good work


    Lost my job after 36 yrs in 2005, had many lates on home in 2006, got caught up, fell again, etc and reached agreement on short sale with lender. Sold and settled on sale in 2008 Credit report shows lates to 180 days in 12/08. Also have three (30day) lates on an auto loan, last one in may 2010. Current income 100k last 3 yrs, debt of $10k, have 20% and was turned down for a conventional mortgage and told I can’t go FHA because of the lates in 2010

  • Stephanie Vrbanic

    Hello! My husband and I went through a short sale almost 3 years ago. May will be 3 years. However, we want to buy with a conventional loan and we have a good down payment. The house we want is only $49,000. Can we buy now?

    • Hi Stephanie,
      You may be eligible to buy using Conventional financing in 24 months from a short sale with a minimum 680 credit score and 20% down payment. You can buy using FHA with a minimum 640 and 3.5% down payment after 3 years.

      Let me know if a lender tells you different

  • Christine P

    Hi Scott,
    I have a question in regard to whether the guidelines are the same for co-borrowers. In other words, I short saled on my home back in January of 2009 due to a loss of employment. My husband had a home that he purchased before we were married and just short saled on it last year (due to loss of employment as well). We are both working now and make plenty of income, my question is would he be able to be a co-borrower on an FHA loan? I have the timing requirements met for FHA and have a mid 700 score. His score is in the mid to upper 600’s, but he just short sold. Can he be on the mortgage or no?

    Thanks so much for your help!

    • Hi Christine,

      Yes, if you are on a loan application, even as a co-mortgager, you will be subject to the same “waiting period”

  • Alan I

    My wife and I completed a short sale in 9/09. We were seeking a loan mod at first, but when the bank refused, we were told to default on our mortgage to start a short sale process. We ended up missing approx 4 months of payments. Before allowing the short sale to go through, we agreed to a 20000 note to make up for the missed payments and to cover closing costs on the sale of the residence.

    I know FHA loans require a 3 year wait before we can qualify for a new FHA loan if there were defaults on payments during the foreclosure process, but there is no wait period if you were current with your payments during the short sale proces.

    We would like to purchase a new home now with a FHA loan. Will we be eligible for a FHA loan now or do we need to wait until 9/12?

    • Hi Alan,
      Conventional financing allows one to buy 1 day out of short sale if you can prove extenuating circumstances, which is almost impossible to do – the short sale would have had to be as the result of death of primary wage earner, permanent disability of primary wage earner or forced relocation by employer.

      Unfortunately, the minimum wait is going to be 3 years if you want to use FHA. Of course, with a 680 credit score and 20% down, conventional is an option.

      If you are eligible for a VA loan, the wait is only 2 years.

      Thank you for the question, wish I had better news. Hope this helps

  • Holly

    Hi Scott,
    Do you know why it is so important for there to be a 24 to 36 month waiting period to borrow again from a Deed in Lieu? Or why this “guideline” (or regulation) is in place? I’m interested in the reasoning behind it.
    It’s so frustrating because most of the time the Banks are holding up the process and the homeowners canot do anything about it. It’s completely out of our control but affecting our lives so much.

    Here’s our situation:
    9/2009 — Ch 7 Bankruptcy Discharged
    Entire time trying to work with the bank to either short-sale, foreclose or DIL. We included the entire amount of the Mortage in the bankruptcy. So the last late payment reported is 9/2009 and the mortgage currently is indicated as “closed” on our report.
    1/2012 – DIL completed

    Both credit scores at 680. And we have more then 20% to put down.

    What is our timeline?

    • Hi Holly,
      A short sale and deed in lieu of foreclosure are considered pre-foreclosure solutions. Both, essentially are a default of the mortgage contract, only with a softer landing and less cost to the lender. It is very confusing that lenders stop reporting mortgages that are included in bankruptcy and I think there should be a law against that. The fact of the matter is, you are still making your payments (or not) and it should be reported.

      Buying again using Fannie Mae financing with a 680 credit score and 20% down is absolutely your “fastest” option right now at 24 months.

      The crime here (not literally) is that the banks do not move faster to work with cooperating homeowners experiencing financial hardship. At the very least it’s deplorable customer service.

      Currently, there are no loan programs offered by conventional banks or lenders that would allow you to expedite this timeline. Private money may be an option if you are willing to pay 9% or more and maybe 4 points in fees. I don’t recommend that route.

      If it’s any consolation, the Fed has committed to keeping interest rates at this level until the end of 2014 and I expect that we are still going to see gradual home values decreases for at least another year or so.

      I guess what i’m saying is that there are no great options available right now, and I think there is a light at the end of the tunnel in regards to buying at low prices and good interest rates for at least the next 3-5 years.

      Thank you for your question – January 2014 is not that far away

  • MD

    Hi Scott,

    I must say that your website is very helpful and I appreciate all your helpful information.

    My husband and I did a short sale on our primary residence and we closed Aug 2010. The mortgage was under his name only and he is the only one working I am a stay at home mom. I had brain surgery in may 2010 around the time we decided to short sale our house.

    We looked into hard money loans and got approval with a 35% down, 9% 5 year interest rate with 2 pts. We live in southern california and we are in the process of looking into homeownership again.

    Is there a mortgage lending institution out there that can give us a regular loan other than hard money loan right now before our short sale waiting period expires? I am looking for a lower down payment requirement and if possible a 30 year fixed. We can put a down as much as 35% but trying to avoid it and just put a down of 20% or less for a $230k home. My husband has a credit score of 670 as of jan 2012 and we’re only getting a loan under his name since my score is lower than his and I don’t work.

    Thank you for any input you might have.

    • You may be eligible to buy again using conventional financing in August with 20% down and a 680 credit score, or 36 months from your short sale using FHA or 10% down using conventional. Private money is very expensive – but might be a good option as a “bridge” loan while you’re waiting out the FHA and conventional guidelines. If you go the private money route, make sure there is no pre-payment penalty for paying off the loan early.

      Hope this helps?

  • PJ

    I did a deed in lieu on a Marriott timeshare in August of 2010. We’ve recently moved for a new job and would like to buy another home. I’m having trouble getting pre-approved due to the deed in lieu. My credit score is 672. What are my best options for getting approved?

    • Hi PJ,
      With 20% down and a 680 credit score, you can buy using a conventional fannie mae loan in 24 months. With 10% down you can use fannie mae in 36 months – You can buy again in 36 months using FHA financing. The starting point for your waiting period is the date the deed of trust was transferred from your name back to the bank, August 2010? So, it sounds like August 2012 with a down payment. Hope this helps

  • Jessamy

    Hi Scott,

    I had a Chapter 7 bankruptcy discharged in May of 2010, and stopped making payments. My mortgage did not report any late payments to my credit. The house was going to go into foreclosure, but I ended up signing up for a short sale. The home is in the long process of being sold. My question is, would the 2 year waiting period to buy begin on the date of bankruptcy discharge, or on the date of the transfer of the deed?

    • Hi Jessamy,
      The waiting period would begin from the date the short sale is completed, so yes, the transfer of the deed of trust. The Ch7 and the short sale are two separate events and the the waiting periods run concurrently. What this basically means is that the bankruptcy has a 2 year waiting period, the short sale has a 3 year waiting period for FHA or shorter with down payment on a conventional loan – in your case, the bankruptcy waiting period will run it’s course, but the short sale waiting period will still be in effect.

      Does this make sense? This can be very confusing sometimes 🙂

  • Lisa

    Scott – My husband and I did a short sale in Nov 2009 after moving from VA to PA. Six months after moving, we purchased a low priced house in PA (Dec 2008) to get out of the in-laws house. We were paying two mortgages for about 10 months. Both were paid on time (checking account drafts) and our credit scores were close to 800. About 18 months after putting the VA house on the market and virtually no offers, we got an offer well below our pay-off. We negotiated to within $18k and our lender agreed to a short sale. Our credit scores dropped to the high 600’s but are now around 730. I would like to move to a larger house in a better neighborhood as soon as possible. I noticed on my credit report that the lender didn’t record what they called something like a ‘partial payment settled for less than the full amount’ until Jan 2010. What date will be the basis for the 3 year waiting period? When the short sale was completed in Nov 2009 or when the lender recorded it in Jan 2010?

    • Hi Lisa,

      Great question! The “waiting period” begins from the day the deed of trust transfers from you to the new owner through the short sale. The recording date on the new deed of trust (in the buyers name) is a matter of public record. Depending on the State and County, many times you can get this information from the County Recorder’s office online. If not, a title company or real estate professional may be able to access the information. It shouldn’t be hard to find.

      • Lisa

        Thank you! I realized after I submitted my question that it was just a different variation of other questions. 😉

  • Leanne


    I qualify for a home loan in regard to my credit score and down payment, debt to income ratio, etc. I was preapproved but the bank said in order to finalize everything I have to wait 3 years after the foreclosure from bankruptcy. The pre-approval was based on the fact that it’s been over 2 years from the date of discharge. However, my problem is that the bank has just been sitting on the property and hasn’t even attempted to sell it or put it on the market. We owed $220 and it appraised for $72 because of the market crash and local foreclosures. Is there not some loophole that would help me here since the bank isn’t even trying to sell the property?

    Thank you!

    • Hi Leanne,

      This is a common problem with many of the banks. It sounds like you’ve stopped making payments on the home and are just waiting for the bank to foreclose? It is accurate that you have to wait for 36 months to buy again using FHA financing after a foreclosure. The 36 months begins on the date that the deed of trust transfers from you to the bank. What the bank does with the home after that is not really relevant and will not affect you at all.

      As far as loopholes? If you have extenuating circumstances out of your control that resulted in the foreclosure, you may be able to shorten that timeline. Extenuating circumstances include death of a borrower/co-borrower, forced relocation by employer and permanent disability resulting in permanent loss of income. Loss of equity is not considered an extenuating circumstance.

      What I would recommend is that you try to communicate with the bank and see if they will allow you to do a short sale or deed in lieu of foreclosure to expedite the process.

      Hope this helps?

  • Mr. Green

    Good Morning, Mr. Schang
    (Love the Site, Great Information!!)

    State of Reference: FLORIDA
    Date Chapter 7 BK filed to the County Court (5/2009)
    Last Date we occupied the Home (5/2009)
    Date Chapter 7 BK was discharged (12/2010) So Far 1 Year after Chapter 7 BK
    Date Chapter 7 BK reported to the Credit Report (12/2010)
    Date Foreclosure reported to the Credit Report (11/2011)

    Husband & Wife credit with all three credit bureau’s pass 700. Household annual Income $210k.

    My question is do we have to wait until the Bank sales the home to another borrower before the “Foreclosure” clock starts?

    We are looking to obtain an FHA loan in the future. We don’t think the foreclosed home will be sold in the next 2 or 4 years. It’s entirely too many foreclosures in the surrounding area. The foreclosed home has been on the county auction log for a couple of months now. No Buyers.

    Thanks for your assistance Mr. Schang!!

    Mr. Green!!

    • Hi Mr. Green,
      The date you need I discover is when the bank actually foreclosed on the home that you vacated.

      If it is reporting on your credit as of 12/2011, the foreclosure date should be close to that.

      You can buy again using FHA financing in 36 months from the date the bank took the home back from you. When the bank resells the home is not relevant to your situation.

      Hope this helps

      • Mr. Green

        Thank you so much Mr. Schang!!

  • Rebecca

    My shortsale is 10 months old. My credit score is 670 and I have 20% for down payment on a house I am interested in. I have no debt and my debt ration is 28%. Could I qualify for a conventional or VA loan at this time, or do I still need to wait another 14 months?

    • Hi Rebecca, unfortunately, 2 years will be the minimum wait time after a short sale as long as your lender did not report the the mortgage as a foreclosure. The only way to know this is to pull the credit and look at the status code. Here is an excerpt from fannie mae:

      Mortgage accounts, including first liens, second liens, home improvement loans, HELOCs,
      and mobile home loans, will be identified as a foreclosure if there is a current status or manner
      of payment/MOP code of “8” (foreclosure) or “9” (collection or charge-off); or if there is
      a foreclosure-related Remarks Code present in the credit report data and associated to the

  • Keith Holliday

    I had a short sale in 2009 and 2010 both FHA loans. I now want to buy another property with a VA loan. Do I still have to wait two years from the last FHA short ales.

    • That would be correct Keith – 2 years from the 2010 short sale. Keep in mind this can change, but for now, that’s what you’re looking at.

  • CM Borrego

    Scott, we are currently shortselling a house out of state. I was the only one on the mortgage. Would my husband be able to get a loan in California in his name after the short sale is complete? We’re going to wait a bit anyway, but I’m curious whether he’d be able to do that and shorten our waiting period. His credit is 700+. He’d been out of work for an extended period of time, so we had to move to find him work (and he is working now).


    • Was he on title of the home? If so, although technically he wasn’t foreclosed on because he’s not financially obligated to the Mortgage, he would have to answer “Yes” to the question on the loan application – “Did you lose a home to foreclosure or deed in lieu in the past 7 years” – to answer this question any other way than “Yes” would be fraud on the application. You’re looking at 36 months from the sale date to be eligible to buy again using FHA financing.

      Hope this helps?

      • MaryAnn

        Hi Scott, We were in the same situation, my husband was the only one on the Title of the house we Short Sold on April 2011. Would I be able to go FHA on my own, My fico is 680 and I bring in about $70,000 a year. MaryAnn

      • Hi MaryAnn, If you are not on title or the loan, you should be eligible to purchase in your name only.

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