The term short sale is repeated quite often when discussing mortgage loans, but not many people truly understand what a short sale is or how they can affect you.

A short sale occurs when you sell your home for less than what you owe on the mortgage and you are not required to pay the difference. For example, if you sell your home for $200,000 because that is all the market will support, but you owe $250,000 on your mortgage, then there is a $50,000 shortage. If your bank or current mortgage lender agrees to forgive that $50,000 shortage, then that constitutes a short sale because you did not pay back everything you owed on the home.

While a short sale may be a good solution for some people, they can impact you in the future when you try to purchase a new home. If you have sold a home through a short sale, the type of loan you select for your new home determines how long you will have to wait to actually buy the home.

For FHA loans, you are required to wait three years after the short sale occurred before you are eligible to purchase a new home. However, FHA loans do allow for extenuating circumstances, such as the death of the primary caregiver. In those situations, you only have to wait one year from the time of a short sale to be eligible for a new home loan.

For conventional loans, there are different guidelines that require as much as a seven year waiting period if you choose to receive the maximum amount of financing. If you are willing to pay a larger down payment, then you will have more flexibility in how long you are required to wait. For instance, if you put 20 percent down on your new home, you are only required to wait two years.

To find out more information on how short sales can affect the purchase of your new Atlanta home in the future, contact Academy Mortgage at 404-558-4399 or visit


Equal Housing Lender. (c)2013 Academy Mortgage License #3113. GA Lic. # 20505. This is not a commitment to lend. Academy Mortgage Atlanta: 5565 Glenridge Connector,  Suite 400. Atlanta, GA 30342. Georgia Residential Mortgage Licensee.

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