FHA has made it significantly easier for once struggling homeowners to qualify for a new FHA loan!
The Federal Housing Administration has announced in Mortgagee Letter 2013-26 that it will reduce the time homebuyers must wait after a bankruptcy, foreclosure, or short sale before qualifying for an FHA-backed mortgage. The period had previously been two years following a bankruptcy, and three years following a foreclosure or short sale. FHA has now reduced the waiting period to one year.
The applicant must be able to document a financial hardship or “economic event” and that the economic event was a result of the loss of a job or the loss of income of at least 20% of the pre-event income. The applicant must also attend HUD approved Housing Counseling.
There are other requirements, such as recovery and re-establishment of credit, length of time of the economic event, and a clean recent 12 months credit history. You can read Mortgagee Letter 2013-26 here for all the details, or you could just give me a call.
While this is not a “free pass” for anyone that chose to walk away, it is a significant benefit for those that experienced a true economic hardship and are sitting on the sidelines now watching rates and housing prices rise, and seeing their opportunity to once again own a home slip away while they wait.
I have a number of people in my data base that I am just keeping in touch with while the clock ticks down from their foreclosure or short sale. Many of these people are being negatively impacted by the reduced affordability with higher rates and prices. I know it may take a lot of work to document that they had a legitimate loss of income, but I also know that several of them will qualify and be in a home a lot sooner than without this program!
If you want to know if you or anyone you care about may benefit from this new program, just give me a call!