The Federal Housing Administration (FHA) has trimmed the waiting period for borrowers that had a foreclosure, bankruptcy, and short sale to one year for FHA Case numbers assigned on or after August 15, 2013.
Prior a borrower that had a bankruptcy had to wait three years and for a short sale or foreclosure two years before becoming eligible to purchase a new home with an FHA insured home mortgage.
If you experienced any of the following financial issues recently you may be eligible sooner rather than later:
- Short Sale
- Pre-foreclosure sales
- Chapter 7 Bankruptcy
- Chapter 13 Bankruptcy
- Loan Modification
- Forbearance agreement
First a buyer must prove that the foreclosure or short sale was cause by an "economic event" - a loss of income and/or employment which was beyond the control of the borrower.
Second the borrower must prove that they have "recovered" from this economic hardship that led to the default or financial hardship. For example if a buyer lost their job and as a result lost their home to foreclosure they must prove that they're currently employed, there were no late payments prior to the foreclosure, and they have been current with their payments/obligations for the past 12 months.
Third the buyer must complete at least one hour of one-on-one housing counseling from the Department of Housing and Urban Development-approved counselor at least 30 days but no more than six months of submitting their application for an FHA insured loan.
If you're interested to see if you qualify for an FHA insured mortgage under these new guidelines please contact us for a mortgage broker referral.