Are you underwater on your home and finding it hard to pay your monthly mortgage? A short sale could be the ideal solution.
With a short sale, you sell your property for less than your remaining mortgage balance, with your lender agreeing to accept the difference and forgive any remainder owed.
But after a short sale, you may be wondering: Can I get another mortgage loan? Fortunately, the answer is yes — although it takes time and preparation.
Here’s what to expect after a short sale, the minimum waiting periods before you can apply for a new mortgage, best practices to follow in the meantime, and what to do if you’re denied.
What to Expect After a Short Sale
Expect your credit score to drop after a short sale — possibly by up to 150 points. The short sale itself will also remain visible on your credit reports for up to seven years. Both factors will make it harder to qualify for future credit, including a mortgage, and even if you are approved, you’ll likely pay a higher rate than you would have otherwise.
Dennis Shirshikov, adjunct professor of economics at City University of New York, puts it plainly: “Obtaining a mortgage after a short sale will be difficult, particularly due to the impact on your credit scores. However, it’s possible with time and the right financial recovery strategies.”
Doug Van Soest, co-founder of So Cal Home Buyers, adds: “The impact of a short sale on your credit score will influence lender perceptions, potentially resulting in stricter down payment demands and higher interest rates.”
Waiting Periods After a Short Sale
Here are the minimum waiting periods before you can apply for a mortgage after a short sale, by loan type:
- Conventional loan: 2–4 years*
- FHA loan: 3 years*; no wait applies if you were not in default on your previous loan at the time of sale and made on-time payments in the 12 months prior
- VA loan: 2 years*; no wait applies if you kept up with timely payments before the sale
- USDA loan: 3 years
- Non-qualifying loans: No waiting required
*Some exceptions apply
The best approach is generally to wait out the required timeframe for the loan program you’re targeting. Some alternative programs have shorter waiting periods, but they typically require a larger down payment and come with higher interest rates.
You may be able to shorten the waiting period on certain loans if you can demonstrate extenuating circumstances — significant life events such as a serious illness or injury, sudden job loss, or the death of a wage earner in the family — with a compelling hardship narrative, according to Van Soest.
Keep in mind that when you’re ready to apply, lenders — including Refi.com — have their own minimum credit score requirements on top of program guidelines. Refi.com requires a minimum of 620 for FHA loans, 620 for conventional loans, and similar minimums for other programs. Working toward a strong credit score during your waiting period will put you in the best position to qualify.
Steps to Take After a Short Sale
The waiting period is an opportunity to strengthen your financial position. A few important first steps:
First, make sure your name is removed from ownership of the home following the short sale — this is an important administrative step that’s easy to overlook.
Then focus on rebuilding your credit. As certified financial planner Jeff Rose advises: “Review your three free credit reports for inaccuracies and errors, and report any you find to the three credit reporting bureaus to get them removed.”
Beyond correcting errors, improving your score requires consistent habits:
- Pay all bills on time and in full whenever possible
- Pay down outstanding debt balances
- Avoid applying for new credit unless you’re confident you can manage it responsibly
- Don’t close existing credit card accounts — keeping them open helps your credit utilization ratio
At the same time, work to build up your savings. “Work hard to save up for the down payment on your next mortgage loan over this time,” says Shirshikov. Cutting unnecessary spending and following a realistic budget will help you get there faster.
As Van Soest puts it: “While this path back to creditworthiness may be steeper, meticulous planning and financial discipline will unlock the gate to your next mortgage.”
Credit rebuilding takes time — especially if your score dropped significantly — so give yourself plenty of runway before applying for a mortgage. When you’re ready, shop around among multiple lenders, compare rate quotes and loan offers carefully, and choose the option that best fits your situation.
What to Do If You Get Turned Down for a Mortgage
Don’t lose hope if your application is denied. Many borrowers face difficulty finding a willing lender after a short sale, even after the minimum waiting period has passed — you’re not alone.
You may need to spend more time improving your credit score and saving for a larger down payment before reapplying. As Van Soest advises: “Patience is crucial here. Overcoming the aftermath of a short sale for future mortgage aspirations requires a strategic approach. Always be transparent in your communication with lenders to build trust.” He also suggests asking whether adding a co-signer might strengthen your application.
It’s also worth exploring different loan programs. As Rose notes: “If you got turned down for a conventional loan, consider applying for an FHA loan or USDA rural property loan. Or, if you are an eligible veteran, military member, or surviving spouse, you may qualify for a VA loan, which requires no down payment.”
If traditional mortgage options remain out of reach, a non-qualifying mortgage, subprime loan, or personal loan may serve as a bridge. An unsecured personal loan requires no collateral, but typically carries a much higher interest rate than a mortgage.
The Bottom Line
A short sale is a difficult situation, but it’s not a permanent barrier to homeownership. Once you’re free of the underwater mortgage, focus on rebuilding your credit, saving for a down payment, and understanding the waiting period requirements for the loan program you’re targeting.
When you’re ready to take the next step toward homeownership, explore your mortgage options with Refi.com — we can help you find the right loan for where you are today.
