August 24, 2015
Of all the questions we get in our comments section about FHA loans, one of the most common topics involves new FHA loans for borrowers who have past bankruptcies, judgments, foreclosures, etc. The answers to these questions depend greatly on circumstance, but what do the FHA loan rules have to say specifically about those who want to apply for a new FHA mortgage, but have had problems with a previous FHA-guaranteed loan?
The answers to these questions can be found, at the time of this writing, in HUD 4155.1, Chapter Four, which instructs the lender as follows:
“If the borrower has had past delinquencies or has defaulted on an FHA-insured loan, there is a three-year waiting period before he/she can regain eligibility for another FHA-insured mortgage. The three-year waiting period begins when FHA pays the initial claim to the lender. This includes deed-in-lieu of foreclosure, as well as judicial and other forms of foreclosures.”
Furthermore, Chapter Four instructs the lender, “Lenders should contact the Homeownership Center (HOC) having jurisdiction over the area where the property subject to default is located for information such as the date the claim was paid, and date of the initial default.”
This waiting period should not be confused with the required waiting period for non-FHA foreclosures, short sales, etc. Each of these circumstances may be different and subject to lender standards, state law, and other factors.
Chapter Four also instructs the lender that in addition to the required waiting period (again, depending on circumstances), the lender will be required to insure the borrower is now currently responsible for insuring that the new loan is a good risk.
“Although a borrower‟s eligibility for an FHA-insured mortgage may be established by performing the actions described previously in this topic, the overall analysis of the borrower‟s creditworthiness must consider a borrower‟s previous failure to make payments to the Federal agency in the agreed-to manner, and document the lender‟s analysis as to how the previous failure does not represent a risk of mortgage default.”
It’s clear from these instructions that the borrower will need to take care to establish good credit patterns following the problem with the first mortgage. If you need help preparing for a new FHA loan in these circumstances, contact the FHA directly by calling them at 1-800 CALL FHA to request a referral to a HUD approved housing counselor in your area.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It’s designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It is easy to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
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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