The FHA announced yesterday that it will shorten the waiting period requirements for borrowers who declared bankruptcy or lost a home to foreclosure or a short sale. This is big news for borrowers who were told they had to wait three or more years after a bankruptcy or losing a home to purchase another home or refinance their current mortgage. The FHA says it will require documentation that the financial distress was caused by extenuating circumstances beyond the control of the borrower. Further, borrowers must demonstrate they have been in good standing with creditors for the last 12 months to be approved for a new FHA mortgage. Here is an excerpt from the FHA Mortgagee Letter 2013-26:
As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.
To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:
– certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;
– the borrower has demonstrated full recovery from the event; and,
– the borrower has completed housing counseling.
If you have suffered through a bankruptcy or the loss of a home and were told you had to wait several years to buy another home or refinance your mortgage contact us in the sidebar today. The FHA just made getting a better mortgage easier.