How Long After a Short Sale Can I Apply for Another Mortgage?
Following the short selling of your home, you may find yourself in a financial position where you believe you can afford a new home. Unlike a foreclosure, which stays on your credit record for 10 years, a short sale is treated differently. Late payments to your mortgage lender may show up on your credit reports, but those reports may not show that your home was sold at a loss to the bank. Buying another home may be possible within two years of a short sale provided you consider several important points first.
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Your Credit
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The first step in buying another home is understanding your financial condition, so obtain copies of your credit reports and your credit score. Three credit reporting bureaus, TransUnion, Experian and Equifax, have detailed information about you in personal credit reports. Visit AnnualCreditReport.com to obtain free copies of all three reports; read these carefully to determine what creditors are saying about you.
Your Standing
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If the information about you in your credit reports is incorrect, then you need to contact the respective reporting bureaus to correct that information. You cannot challenge negative but factually correct information about yourself, however. If loan details -- such as payment history -- are inaccurate, you need to follow each credit bureau's procedures for correcting that information as well because it can have a negative bearing on your credit score, a critically important number creditors look at when deciding whether to lend you money.
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Your Score
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With a short sale, your credit score can take a huge hit depending on how your mortgage lender reported your loan. If your loan is marked "paid," then your score won't be affected, although earlier late payments reported by the lender will show up and lower your score. If your account is marked "settled," then your score will reflect that action; your credit score will be lowered significantly, according to Experian. You can obtain your credit scores for a nominal fee through the same website where you can get your credit reports for free.
Your Finances
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Consider your finances before making a decision to apply for another mortgage. If your credit score is low, you would be better off repairing your credit before applying. Time, meeting all of your other payment obligations and rebuilding your credit are some of the ways you can gradually improve your credit. Fannie Mae, the largest backer of residential mortgages, has a waiting period before you can apply for a new loan. As stated in its quarterly report for the period ending June 30, 2010: "Borrowers with extenuating circumstances or those who agree to foreclosure alternatives may qualify for new mortgage loans eligible for sale to Fannie Mae in as little as two to three years." If your financial picture has improved dramatically, contact your bank to see if it would consider extending a home loan to you.
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