In many situations, a short sale can be an effective way to prevent foreclosure by selling your home for less than the balance on the loan. Once a buyer is found, the bank will often let you walk away from your home and with some money as well to help you with the moving costs. One thing most homeowners will be wondering after a short sale is: when will I be able to buy another home?
Lucky for you, it may be sooner than you think. Generally, you’ll have to wait 2 years until you can buy another home; however, if you don’t have any 60-day late payments, Fannie Mae (a government company which buys mortgages in the secondary market and which probably owns your loan) will allow you to immediately buy another home. An issue you may still face is that of qualifying for a loan with any of the major banks, as the fact that you just had a short sale performed will still impact their decision on whether or not to provide you with the loan.
Another important thing to keep in mind is the way that a short sale is recorded on your credit report. When performing a short sale, it is, in essence, being viewed as a settlement of your debt on your credit report, even though it is for a lesser amount; a foreclosure, however, is just viewed as a default and will be reflected upon your credit report accordingly. The important thing is to begin building your credit again so that you can be ready to apply for a loan when the time comes. Create a plan for paying down all of your credit cards and clearing potentially negative reportings from your credit report. Also, make sure you are saving important documentation that will be requested by your bank when you apply for a loan, such as your bank statements, proof of wages and income, and your tax returns.