You can buy a home after a short sale with FHA-See How

What are the guidelines for borrowers with a short sale on a previous principal residence?

When a previously owned property was sold for less than what was owed (short sale), borrowers are considered eligible for an FHA insured mortgage if, as of the loan application date, all mortgage and installment debt payments were made within the month due for at least the twelve months preceding the short sale.  Most lenders require the borrowers to be past due before considering a short sale but if the borrower is able to short sale their home without any late payments, then FHA may be an option right away.

Borrowers that were in default at the time of the short sale (or pre-foreclosure sale) are not eligible for three years from the date of the sale.  Borrowers who sold their property under the FHA pre-foreclosure sale program are not eligible for three years from the date that FHA paid the claim associated with the pre-foreclosure sale.  Lenders may make exceptions for borrowers in default at the time of short sale if:

• The default was due to circumstances beyond the borrower’s control (such as death of a primary wage earner, long term uninsured illness, etc.); and
• The credit report reflects satisfactory credit prior to the circumstances (beyond the borrower’s control) that caused the default.

Borrowers who pursued a short sale agreement on their principal residence to take advantage of declining market conditions and purchase a similar or superior property within a reasonable commuting distance are not eligible for a new FHA insured mortgage right away.

Learn tips to re-establish credit after a short sale by reading the following credit reporting articles by clicking on each:  Common misconceptions about credit scoring, Why & how you should check your credit report every year, How to have perfect walk on water qualifies for the best rate there is credit (even after a short sale).

ML 09-52

http://portal.hud.gov/hudportal/HUD?src=/program_o…

Handbook 4155.1: 4.C.2.l

http://portal.hud.gov/hudportal/HUD?src=/program_o…

REFERENCE

ML 09-52: Handbook 4155.1: 4.C.2.l

REFERRAL LOCATION

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

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