February 10, 2015
A reader asks, “We had a job loss and were working on a loan modification that was supposedly going to be approved and was then denied. We filed and were discharged from CH 7 back in 2010, never reaffirmed the mortgage, but paid on it until it was obvious we were not going to get any cooperation from the lender. Moved out and short sold in May 2013 and are now looking to buy again.”
“What is the FHA standard for the downpayment we’d have to make? We have been told 20%, but read elsewhere that for a mortgage that was discharged in bankruptcy and never reaffirmed, that the applicable period for any wait time is the date of the bankruptcy discharge and not the date of the short sale? Does that also mean that we are now in the 4 year period for purposes of the required downpayment (e.g., 10%)?”
Borrowers who are current on their mortgage loan at the time of the short sale may be eligible (depending on the lender’s standards) for a new FHA loan without a waiting period. Those who were delinquent on FHA loans at the time of the short sale would have a minimum three-year waiting period. There is an exception through the FHA Back-To-Work program, but borrowers who were delinquent on the mortgage must have had “qualifying circumstances” and the lender must approve
Here’s what the FHA loan rulebook, HUD 4155.1 Chapter Four says about getting an FHA loan after a short sale:
“A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all mortgage payments on the prior mortgage were made within the month due for the 12-month period preceding the short sale and installment debt payments for the same time period were also made within the month due.”
As you can see, the FHA has specific guidelines on who can and cannot apply for a new FHA loan below the required amount of time (the seasoning period) following the short sale. For more information you would need to speak to a loan officer to determine whether that financial institution is willing to work with you in your circumstances.
The downpayment issue may vary depending on lender standards, the borrower’s circumstances and other variables, so again, it is best to discuss the situation with a loan officer.
Do you have questions about FHA home loans? Ask us in the comments section.
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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