January 6, 2015
A reader asks, “How long is the waiting period after a short sale?”
There are two standards that may apply. One is the lender’s standards which may or may not go beyond FHA minimum requirements. For that you would need to discuss your situation with a loan officer. But the FHA minimum standards are very clearly defined in FHA Mortgagee Letter 09-52, which begins by saying:
“Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to
• take advantage of declining market conditions, and
• purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.”
That said, borrowers may be eligible for a new FHA loan without a minimum wait time (according to the FHA, check with the lender for standards that may go above and beyond the FHA minimum requirement) IF the borrower was current on the mortgage loan at the time of the short sale. According to Mortgagee Letter 09-52:
“Borrowers are considered eligible for a new FHA-insured mortgage if
• they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and
• the proceeds from the short sale serve as payment in full.”
Borrowers who were not current on mortgage loan payments at the time of the short sale should know the following FHA guidelines:
“Borrowers in default on their mortgage at the time of the short sale (or preforeclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Lenders may make exceptions to this rule under certain circumstances.”
Note that the lender does have discretion in such cases, but you would need to discuss the circumstances with the loan officer.
Do you have questions about FHA home loans? Ask us in the comments section. You can also follow us on Facebook.
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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