May 1, 2015
A reader asks, “My father purchased a home approx.13 years ago. He became ill in the beginning of 2013 and died the end of 2013. I was the co borrower of the home. I tried to do everything in my power to keep the home but did not receive any help. The help that was available was only for those who had a spouse. The house foreclosed in Sept 2014. I have been without a place to live since then because of the foreclosure being on my credit report. This is the worse I have ever dealt with.”
“I have been employed for nearly 19 years. I work hard everyday and now living with my mother because I couldnt save my fathers home after his death. I live in Nashville,TN. The rent has double and even triple. Its easier to buy a home than to rent. I would like to buy my own home but I have this awful foreclosure on my credit report. You cant control death and I dont feel I should be punished because I couldnt save my fathers home after his death. Is there anything I can do to help me purchase my own home?”
FHA loan rules found in Chapter Four of HUD 4155.1 (Section C) addresses situations where the borrower has a foreclosure on his or her record:
“A borrower is generally not eligible for a new FHA-insured mortgage if, during the previous three years
–his/her previous principal residence or other real property was foreclosed, or
–he/she gave a deed-in-lieu of foreclosure.”
But there ARE exceptions to this rule for certain qualified potential FHA loan applicants. From Chapter Four:
“The lender may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.”
That portion of the FHA loan rules covering foreclosure seems to be the most relevant for this reader question–finding a participating FHA lender willing to work with the borrower’s circumstances would be the priority here, as is establishing good credit in cases where that may be an issue. (We aren’t saying that is an issue here, simply pointing out what needs to be done in certain cases.)
The FHA loan rulebook is quick to point out that, “Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a borrowers loan was current at the time of his/her divorce, the ex-spouse received the property, and the loan was later foreclosed.” Additionally, the FHA rules say, “The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.”
Do you have questions about FHA home loans? Ask us in the comments section, but please be aware that all comments are held for review prior to being posted on the site.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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