FHA eases up on buyers with past short sales or bankruptcy on credit

If you have had a past short sale or bankruptcy there are different timelines you must meet to buy again based on the new financing you are buying with.  For example, Conventional, (Fannie  Mae or Freddie Mac), VA or FHA.

Fannie Mae will lend again 2 years after a short sale with 20% down or 4 years later with 10% down.  If you had a bankruptcy the timeframe is 4 years for a chapter 7 or 2 years for a chapter 13 (from the discharge date). 

VA loans require 2 years on a short sale, 2 years on a Chapter 7 and 1 year past a chapter 13. 

FHA is 3 years post short sale if you had mortgage lates leading up to the short sale,  (no lates the time is less) and they are 2 years on a chapter 7 and 1 year on a chapter 13  However, FHA is shortening the waiting period for some borrowers who had had previous short sales, bankruptcies.

For borrowers who meet certain requirements, FHA is trimming down the amount of time that homebuyers must wait after a bankruptcy or short sale before they may qualify for a FHA mortgage to 1 year.  This is great news as the waiting period had been 2 years after the completion of a bankruptcy and 3 years after a foreclosure or a short sale.

Who can qualify under the new “back to work extenuating circumstance” policy? Borrowers must be able to show their household income fell by 20% or more for at least 6 months and prove the reduction was tied to unemployment or another “economic event” beyond their control. 

Feel free to contact me with any questions.