August 4, 2014
A reader asks, “I was discharged from Chapter 7 in 2010, and the sheriff sale on my home was June 27, 2012. The mortgage company is telling me that the only way to do a conventional loan after two years from the sheriff sale, is to put 15% down. Is this correct?”
We can’t comment on conventional loans–that’s outside the scope of our writing here, which covers FHA loans. However, the question is still valid when applied to an FHA loan application–what’s the right answer?
Unfortunately, there is no single answer because in cases like these, lender standards may apply. The FHA loan program has minimums including a minimum down payment requirement of 3.5%. But in cases like these lender standards may require the borrower to have a longer waiting time after the FHA minimum “seasoning period” after a foreclosure or bankruptcy.
And yes, the lender standards for a higher down payment may also apply. Lenders are not forbidden from requiring higher standards than the FHA minimums so long as those standards are applied consistently according to Fair Housing Act laws and other federal guidelines.
There are many reasons for a lender to require a higher down payment–credit issues can definitely factor in to such a decision. Borrowers should discuss their circumstances and needs with several lenders to get the most competitive rates and terms possible on an FHA home loan.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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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