We all know lending guidelines change constantly so it’s always best to consult a loan professional about current guidelines.
Following are the basic guidelines and wait times to purchase a home after Short Sale, Foreclosure or Bankruptcy using FHA financing:
Short Sale of a delinquent mortgage (1 late payment or more) or an FHA insured mortgage:
- Must be treated as foreclosure and a minimum three years must have elapsed since the date of pre-foreclosure/short sale completion. If FHA insured loan, CAIVRS will reflect claim paid.
Short Sale of a Non Delinquent Mortgage (waiver of the 3 year waiting period):
- No late mortgage payments made in the 12 months prior to the short sale
- No late payments on any installment or Revolving debt made in the 12 months prior to the short sale
- Subject property is not located in the same geographic area as the property on which the short sale was completed.
- Proceeds from the short sale serve as payment in full. The existing note holder must write off the amount of indebtedness that cannot be refinanced into the new mortgage due to a decline in property value and/or a reduction in income.
- Cannot have a previous foreclosure or bankruptcy.
- A minimum three years must have elapsed since the date of foreclosure completion
- Evidence of completion of the foreclosure must be in the loan file. The credit report verifying foreclosure completion is not acceptable.
NOTE: If the mortgage that was foreclosed on or short sold was an FHA loan, the 3 year waiting period is from the date HUD paid the insurance claim which would be after the actual foreclosure and/or short sale of the mortgage.
You must contact HUD directly to find out what date the insurance claim was paid.
Click Here to read about the newly announced Back to Work Program, which can shorten the wait time to purchase to 12 months with extenuating circumstances.
Bankruptcy Chapter 7- Debts are discharged through BK, client does not pay any debts owing.
- 2 years from date of discharge with re‐established credit paid as agreed or no new credit obligations incurred.
- Less than 2 years, but not less than 12 months from date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstances, and the borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.
Bankruptcy Chapter 13- Debts are paid back on a monthly scheduled payment plan by client.
- 1 year payout period under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory; and all required payments made on time.
For more information on purchasing a home with FHA financing contact me via email at firstname.lastname@example.org or directly at 510.282.5456.