January 12, 2015
A reader asks, “If we do a short sale and are current on our mortgage, can we still get an FHA loan if we had any other late payments during the year? It is confusing because in one section it says “current on mortgage and other installment loans” and in all other places it just says “current on Mortgage.”
FHA loan rules make it clear that lender discretion is an important factor in situations like these. In general, FHA loan rules say that a lender may permit a borrower with a short sale to apply for a new FHA loan without a waiting period IF the borrower was current on the previous mortgage loan at the time of the short sale.
That said, lender standards still apply when it comes to credit worthiness and other issues. If a borrower has missed a payment or payments within the 12 months leading up to the new FHA home loan, that issue may affect the lender’s ability to approve the loan.
In some cases the lender may be able to exercise discretion in this area provided the borrower is otherwise qualified, or has significant compensating factors that may work in the applicant’s favor.
Borrowers are urged to come to the FHA loan application process with at least 12 months of on-time bill payment on the borrower’s record. Anything less could jeopardize the application depending on circumstances.
So the bottom line is that the lender may or may not accept the borrower’s late payments depending on what led to them and other factors.
It’s crucial to document or be ready to provide documentation as to the circumstances of the missed payment, especially if they were beyond the FHA loan applicant’s control. Speak to your loan officer to learn what may or may not apply in your individual circumstances.
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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