Getting a Mortgage After a Short Sale or Foreclosure

July 14, 2016



The housing bubble triggered foreclosures to hundreds of thousands of distressed homeowners all over our nation. If you experienced a foreclosure or opted for a short sale, that doesn’t mean you will never be able to own a home again.


Your credit will take a hit after a foreclosure or short sale. The Federal Housing Administration (FHA) loans are the most forgiving of foreclosures. You’ll have to wait at least three years after your foreclosure to qualify. The three years starts when your foreclosure case has ended (usually when your home has sold in the foreclosure).


There are exceptions to the waiting period. You may qualify for a loan before the three- year period if you can prove extenuating circumstances. There are other exceptions such as maximum loan-to-value (LTV) ratios. A foreclosure defense/real estate attorney can help you with these.


Generally, a short sale won’t hurt your credit rating as much as a foreclosure. Unfortunately, many mortgage underwriting systems can’t distinguish a short sale from foreclosure on consumer reports. That flaw may keep or delay you from getting a new mortgage. There are vital differences between a short sale and foreclosure that consumers should be aware of.


A short sale happens when you sell your home for less money than you owe on the mortgage loan. Your lender has to agree with the short sale price instead of foreclosing on your property. Having a qualified foreclosure defense/real estate attorney will be extremely helpful in obtaining and negotiating a short sale price, reviewing offers and finalizing the sale. Your attorney can also negotiate the deficiency. The deficiency is the difference between the sale price and what you owe. If you owe $350,000 and the lender accepts $150,000 in a short sale action, you don’t want to be charged for the $200,000 difference (deficiency) from the IRS.


A foreclosure occurs when you don’t make the mortgage payments or fall behind on a modification. The lender will take legal action to repossess your home.


It’s recommended to start aligning your finances as far in advance as a year when planning on buying another home. Nothing will stop a sale faster than having a bad or inaccurate credit report. By the time you correct or bring your rating up, the house you wanted probably will have been sold to someone else.


Having a higher credit rating translates into getting a lower interest rate, saving you thousands of dollars. Homeowners have certain protections under The Home Ownership and Equity Protection Act concerning what loans are covered, what disclosures are required and what is not allowed.  Make sure your credit report is accurate. If it’s not, again, a qualified attorney can help repair and ensure the credit report is corrected.


Once you have reached out to a lender, in most cases, you have signaled your desire to obtain a mortgage. You may begin receiving offers from lenders and scammers. We know there were abusive lending practices and predatory lenders in the first housing bubble. Before signing any contract, have your attorney review the documents to ensure your interests and rights are protected. 


If you have legal questions regarding your mortgage, or obtaining a mortgage, or refinancing, contact Gantenbein Law Firm's Denver real estate attorneys for your best options in securing your mortgage. Gantenbein Law Firm's lawyers can also assist with your residential or commercial real estate closing, reviewing any and all real estate docs, and assist with any post-foreclosure issues that may arise during the mortgage process.


If you are in foreclosure, facing foreclosure, or need assistance with loan modifications, contact Gantenbein Law Firm attorneys for a consultation of your case. 


Gantenbein Law Firm also practices Business Law, Tax Law- including IRS audits, back tax issues, and tax litigationCredit Dispute, and Estate Planning, Trusts, Wills and Probate Law. For more information on these areas of practice, call 303-618-2122 or visit






















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