Credit glossary
Short sale
Selling a home for less than the mortgage balance with the lender's approval, with the lender accepting the proceeds instead of a full payoff.
A short sale avoids foreclosure, but it isn't a clean exit. The mortgage usually shows the late payments that came before it and a status reflecting the sale, and that negative information can stay up to seven years. Ask the lender to state in writing whether any remaining balance is waived, because that decides whether a deficiency can follow you.
The wait for a new mortgage is shorter than after foreclosure. Fannie Mae requires 4 years, or 2 with extenuating circumstances, against 7 for foreclosure, and Freddie Mac's manual rules use 48 months, or 24 with extenuating circumstances. VA training material says there's no set waiting period after a short sale. The IRS exclusion for forgiven principal-residence debt covers only debt discharged before January 1, 2026, or under a written arrangement made before then.
Guides that go deeper
- Short sale, deed in lieu or loan modification: the credit trade-offsHow a loan modification, short sale and deed in lieu each show up on your credit report, what you might still owe, and how long each delays your next mortgage.
- Mortgage waiting periods after bankruptcy, foreclosure or short saleFHA, VA, USDA, Fannie Mae and Freddie Mac waiting periods after Chapter 7, Chapter 13, foreclosure, short sale and deed in lieu, with sources and start dates.
Sources
- B3-5.3-07, Significant Derogatory Credit Events: Waiting Periods and Re-establishing Credit, Fannie Mae Selling Guide
- Underwriting Reminders for Loan Product Advisor Caution Risk Class Mortgages, Freddie Mac
- Loan Guaranty Conference 2023: Credit Underwriting, U.S. Department of Veterans Affairs
- Topic no. 431, Canceled debt: Is it taxable or not?, Internal Revenue Service
- Housing Counselor Study Guide, Module 5.3: Avoiding Foreclosure and Disposition Options, U.S. Department of Housing and Urban Development
This is education, not legal or financial advice. Spot an error? Tell us and we'll fix it.