FHA Short Sales - New FHA Rule

Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to

• take advantage of declining market conditions, and

• purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.

Borrowers are considered eligible for a new FHA-insured mortgage if

• they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and

• the proceeds from the short sale serve as payment in full.

Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Lenders may make exceptions to this rule under certain circumstances.