You can buy again after a short sale, and the wait is shorter than most people expect. On a conventional loan it is usually four years from the closing date of the short sale, or two years if you put 20% down. FHA can be as short as no wait at all if every payment was on time before the sale. Here is how each loan counts the clock, what the credit hit really looks like, and how to line it up for Scottsdale, Phoenix, and the rest of Metro Phoenix.

How the waiting clock works

The clock starts on the day the short sale closes, not the day you listed the house or the day the bank approved the offer. That date is on your settlement statement, and the lender will ask for it. Count from there.

Each loan program sets its own wait, and lenders sometimes add stricter rules of their own. The program rules are public. HUD publishes its FHA guidance on the HUD website, and the VA explains its loan program on va.gov. A short sale is also not the same event as a foreclosure or a bankruptcy. If you went through either of those instead, read our guide to buying a house after bankruptcy or foreclosure in Arizona.

Waiting periods by loan type

Conventional is the longest, FHA is the most flexible, and non-QM is the earliest. The table shows the common rules. Your lender can be stricter than the program, so treat it as a starting point.

The date on the settlement statement starts the clock. Everything else is paperwork.

The FHA rule is the one people miss. If you stayed current on the mortgage until the day of the sale, and every other debt too, the three year wait can disappear. If you were behind for months before the bank approved the sale, the full three years applies. That one fact is the reason I ask for the payment history before I ask for anything else.

What a short sale does to your credit

It hurts, but it hurts less than a foreclosure, and the late payments before it usually do most of the damage. Your lender will pull a fresh report and look at three things: the score today, how the account was reported, and whether you have paid everything on time since.

A clean record after the sale is the part you control. Use two or three well-managed accounts, keep card balances low, and do not miss a payment on anything. Our guide to the credit score needed to buy a house in Arizona lists the minimums by loan type. The Consumer Financial Protection Bureau explains how to read your reports in its credit reports and scores guide.

Score also changes price. Here is a simple illustration, not a quote. A $400,000 home with 10% down leaves a $360,000 loan, and the table shows what a higher rate does to the principal and interest payment.

Over five years the middle tier costs about $7,560 more and the weaker tier about $15,120 more. That is why waiting six more months to rebuild your score can be worth real money. Plug your own price into the calculator below to see where you land.

Run your own numbers

The deficiency and the 1099-C

Before you worry about the next mortgage, make sure the last one is closed out. A short sale means the bank accepted less than you owed. The question is what happened to the difference.

Get the lender's approval letter and check that it says the remaining balance is released. If it does not, ask the servicer in writing. If the lender forgave the debt, you may get a Form 1099-C, which reports canceled debt to the IRS. The tax rules for forgiven mortgage debt have changed more than once, so take the form to a tax preparer. The IRS explains the form on its Form 1099-C page. A future lender will not care about the tax. It will care that the debt is closed.

What to do while you wait

Use the wait to build the file you will need. Four things matter most.

• Pay everything on time. One late payment after a short sale can reset the story the underwriter tells about you.
• Save a bigger down payment. At 20% down, the conventional wait can drop from four years to two.
• Keep your debt low. Lenders count your monthly debts against your income, and our guide to the debt to income ratio to buy a house in Arizona shows the limits.
• Stay in one job if you can. A steady two year history makes every other part of the file easier to approve.

Which loan fits after a short sale

FHA is usually the first loan to open, because the rules are the most forgiving on credit and the wait can be zero. Conventional costs less over time once you are past four years or have 20% down. Our comparison of FHA and conventional loans in Arizona walks through the mortgage insurance and the monthly cost. If your income runs through a business, a bank statement loan may fit sooner, and you can see all of the options on our loan programs page.

Your down payment decides more than the wait. A larger down payment lowers the loan amount, lowers the risk the lender sees, and on conventional loans it is the one lever that cuts two years off the clock. If family wants to help, our guide to gift funds for a down payment in Arizona explains the paper trail the lender will want. Do not move large sums around without a plan, because every unexplained deposit becomes a question in underwriting.

Buying again in the Valley

Do not rush to beat the clock if the market is not ready for you. Look at what is for sale before you set a target price. The Homes.com Phoenix housing market report shows where prices and inventory sit, and you can browse current listings on Arizona Luxury Property Search. When you are ready, our process page shows what happens from pre-approval to closing, and you can start at pillarmortgagegroup.com.

One practical point. Start the conversation with a lender a few months before the clock ends, not on the day it does. We can pull your credit, flag any problem, and tell you what to fix while there is still time to fix it.

Frequently asked questions