FHA Changes Waiting Period for Borrowers Who Experienced Foreclosure

Typically borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHA loan, but with this new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.FHA financing

The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to be able to purchase in  as little as 12 months. This guideline is only for the case numbers assigned on or after August 15,2013 and is effective through September 30,2016.

In order to be eligible for the more lenient approval process, borrowers must  provide documents  showing “certain credit impairments” were due to loss of employment or loss of income that was beyond their control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must show that  they have fully recovered from the event that caused the hardship. The borrowers may have to  re-establish credit for at least 12 months which could be with history of payments such as a mortgage, rent, or credit account.

 

 

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