When can you qualify for an FHA loan if you have had a short sale on your previous home?
Here's what David H Stevens (United States Dept. of HUD) states in a recent letter to REALTORS:
Q: What guidance was recently published by FHA about short sales? What changes will you be making and when will they be introduced?
FHA issued new guidance to help responsible borrowers who did not fully payoff their mortgage due to extenuating circumstances gain access to FHA financing. On Dec. 16, we released a Mortgagee Letter (09-52) to lenders and underwriters regarding borrower eligibility for a new FHA mortgage after pursuing a short sale (when a previously owned property is sold for less than what is owed) or a short payoff, when there is a principal write down of indebtedness that cannot be refinanced into a new mortgage.
In the letter, which took effect immediately, we stated that borrowers are considered eligible for a new FHA-insured mortgage if: 1) they were current on their previous mortgage and other debts at the time of the short sale and 2) if the proceeds from the short sale serve as payment in full.
We also stated that borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement to take advantage of declining market conditions, or to purchase another property at a reduced price. Additionally, borrowers who execute a short sale while in default on their mortgage are not eligible for a FHA-insured mortgage for three years from the date of the sale. Lenders, however, can make exceptions if the default was due to circumstances beyond the borrower's control, such as the death of the primary wage earner.
If you would like a PDF version of the Mortgagee Letter (09-52) please let us know and we will email the complete 6 page document to you for your files.
Talk to you soon,
Mike and Ceili Yablonsky