A short sale is a transaction where a homeowner sells their property for less than the amount owed on their mortgage. The lender agrees to accept the proceeds of the sale to satisfy the debt. The duration of a short sale can vary depending on the complexity of the transaction and the lender’s review process.
Key Facts
- The duration of a short sale can vary: A short sale can take as little as a few weeks or as long as several months. The process tends to be more time-consuming due to the complexity of the transaction and the need for the original lender to review and accept the short sale offer.
- Impact on credit: A short sale can have a negative impact on your credit score, and it can remain on your credit report for up to seven years. The exact decline in your credit score will depend on your credit history and the scoring system used by credit agencies.
- Rebuilding credit after a short sale: If you plan to buy a home in the future, it’s important to work on rebuilding your credit. Steps to boost your credit score include reviewing your credit report for errors, paying off existing debt, avoiding late payments, and keeping credit utilization low.
- Waiting periods for getting a mortgage after a short sale: The waiting period to qualify for a new mortgage after a short sale can vary depending on the loan type and your financial situation. Here are some general waiting periods:
- Conventional loan: 2-4 years with exceptions
- FHA loan: 3 years with exceptions, or 1 year with extenuating circumstances
- USDA loan: 3 years
- VA loan: 2 years with exceptions
- Non-qualifying mortgage (non-QM): No requirement
Timeframe
A short sale can take as little as a few weeks or as long as several months. The process involves multiple steps, including the homeowner submitting a hardship letter, obtaining lender approval, finding a buyer, and negotiating the sale price. The lender’s review of the short sale offer can be lengthy, as they must determine whether it is in their best interest to accept the offer.
Impact on Credit
A short sale can negatively impact a homeowner’s credit score. It can remain on their credit report for up to seven years, potentially making it difficult to qualify for future loans. The specific impact on the credit score depends on the homeowner’s credit history and the scoring system used by credit agencies.
Rebuilding Credit
After a short sale, homeowners can take steps to rebuild their credit. This includes reviewing their credit report for errors, paying off existing debt, avoiding late payments, and keeping credit utilization low. By taking these measures, homeowners can gradually improve their credit score and increase their chances of qualifying for a mortgage in the future.
Waiting Periods for Mortgages
After a short sale, there are typically waiting periods before homeowners can qualify for a new mortgage. These waiting periods vary depending on the type of loan and the homeowner’s financial situation. The following are general waiting periods for different loan types:
- Conventional loan: 2-4 years with exceptions
- FHA loan: 3 years with exceptions, or 1 year with extenuating circumstances
- USDA loan: 3 years
- VA loan: 2 years with exceptions
- Non-qualifying mortgage (non-QM): No requirement
Conclusion
The duration of a short sale can vary depending on the specific circumstances. It is important for homeowners considering a short sale to understand the potential impact on their credit and the waiting periods for obtaining a new mortgage. By working to rebuild their credit and meeting the waiting periods, homeowners can increase their chances of securing a mortgage in the future.
Sources
- Bankrate: What is a Short Sale?
- Bankrate: Can I Get a Home Loan After a Short Sale?
- Investopedia: What Is a Short Sale on a House?
FAQs
How long does a short sale typically take?
A short sale can take as little as a few weeks or as long as several months, depending on the complexity of the transaction and the lender’s review process.
What factors can affect the duration of a short sale?
Factors that can affect the duration of a short sale include the number of liens on the property, the lender’s workload, and the availability of a qualified buyer.
How can I speed up the short sale process?
To speed up the short sale process, homeowners should gather all necessary documentation, work with an experienced real estate agent, and be prepared to negotiate with the lender.
What happens if a short sale falls through?
If a short sale falls through, the homeowner may have to consider other options, such as foreclosure or a deed-in-lieu of foreclosure.
How long does a short sale stay on my credit report?
A short sale can remain on a credit report for up to seven years, potentially impacting a homeowner’s ability to qualify for future loans.
What can I do to rebuild my credit after a short sale?
To rebuild credit after a short sale, homeowners can review their credit report for errors, pay off existing debt, avoid late payments, and keep credit utilization low.
Are there any waiting periods for getting a mortgage after a short sale?
Yes, there are typically waiting periods before homeowners can qualify for a new mortgage after a short sale. These waiting periods vary depending on the type of loan and the homeowner’s financial situation.
What are the alternatives to a short sale?
Alternatives to a short sale include forbearance, loan modification, and deed-in-lieu of foreclosure. Homeowners should explore all options with a housing counselor or financial advisor to determine the best course of action.