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FHA Waiting Period JUST REDUCED For Short Sale, Foreclosure and Bankruptcy

FHA Waiting Period REDUCED to One Year

Prior Bankruptcy, Foreclosure or Short Sale OK

FHA has changed the rules again, but this time for the better! As of last week, FHA will now allow borrowers with a previous short sale, foreclosure or bankruptcy (over one year ago) to buy a new home!

Regarding FHA Mortgagee Letter 2013-26 – RE: FHA Waiting Period Changes

Prior to this change, the FHA waiting period was 2 years after bankruptcy and 3 years after a short sale or foreclosure. This program change could potentially free up hundreds of thousands of new homebuyers that fell victim to the recession but have now gotten back on their feet.

Sounds too good to be true. What’s the catch?

  • You have to show extenuating circumstances of why you had to claim bankruptcy, foreclosure or short sale your home.  More specifically, your income must have decreased by over 20% for a period of over 6 months and the reduction in income must be due to unemployment or another event ‘beyond your control’
  • Complete at least one hour of approved housing counseling
  • Must show 12 months of on-time rent payments
  • This exception is only being made on purchases, not refinances at this time
  • It may take some searching. Although FHA made these changes, most banks will not be going by these guidelines. Brokers typically have more lenders and programs to choose from, so it definitely works in your favor.
As a licensed mortgage professional, I am ecstatic about the reduction of FHA waiting periods.  This will hopefully set the precedence for more forgiving lending guidelines in the future and eventually get this economy back on track!

About the Author

Jason Gonzalez

Jason is a lifelong student of the mortgage industry that prides himself on his innovative ability to consistently find the best deals for his clients. With well over a decade of industry knowledge and experience, you can trust that he will help guide you in the right direction for your home financing needs. What separates Jason from everyone else is the fact that he cares so much about the people he helps, driving him to go above and beyond to make the dream of homeownership possible for all.