FHA Changes Waitng Period After Short Sale!

Borrowers that may be otherwise ineligible for an FHA-insured mortgage due to FHA’s waiting period for bankruptcies, foreclosures, deeds-in-lieu, and short sales, as well as delinquencies and/or indications of derogatory credit, including collections and judgments, may be eligible for an FHA-insured mortgage if the borrower
· can document that the delinquencies and/or indications of derogatory credit are the result of an Economic Event as defined by FHA,
· has completed satisfactory Housing Counseling, and

· meets all other HUD requirements.

For the past several years the waiting period after a short sale, foreclosure, deed in lieu or bankruptcy has been three years with a few exceptions for medical hardships. With this new policy from FHA/HUD, a borrower who can demonstrate an Economic Event may qualify for an FHA mortgage after a waiting period of only one year.

An Economic Event is any occurrence beyond the borrower’s control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower’s Household Income of twenty (20) percent or more for a period of at least six (6) months. The borrower must document the loss of income and show recovery from it.

Recovery from an Economic Event is the re-establishment of Satisfactory Credit (as defined on page 5 of this ML) for a minimum of twelve (12) months.

There are many other requirements for verification of both current status and the status at the time the economic event occurred so give us a call for a full evaluation or go to algage.com under mortgagee letter for details.
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