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Can you buy a home AFTER a short sale?

Can you buy a home AFTER a short sale?

We get asked this question just about everyday, so here are the FHA rules.

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Short Sales Rules with FHA Financing

A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale agreement on his/her principal residence simply to

• take advantage of declining market conditions, and
• purchase at a reduced price a similar or superior property within a reasonable commuting distance.

Borrowers Current at the time of Short Sale
A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all

mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and

• installment debt payments for the same time period were also made withinthe month due.

Borrowers in Default at the time of Short Sale
A borrower in default on his/her mortgage at the time of the short sale (or preforeclosure sale) is not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.

Note: A borrower who sold his/her property under FHA’s pre-foreclosure sale program is not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale.

Exception: Lenders may make exceptions to this rule for borrowers in default on their mortgage at the time of the short sale if the

• default was due to circumstances beyond the borrower’s control, such as death of primary wage earner or long term uninsured illness, and
• review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default.

References:
• For detailed information on converting existing principal residences into rental properties, see HUD 4155.1 4.E.4.g.
• For information on short payoffs, see HUD 4155.1 3.B.1.f.

  http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.1/41551HSGH.pdf


Be Smart - Get Answers

Joe Metzler is a Certified Minnesota Mortgage Specialist (MMS). His team has over 50-years mortgage lending experience in MN and WI. View his web site at www.JoeMetzler.com. Joe's NMLS  # is 274132

Joe Metzler, MMS - (651) 552-3681
Beating the banks since 1991


33 Wentworth Ave E #290, Saint Paul, MN 55118 Ph: (651) 552-3681

Mortgages Unlimited is a Full Eagle FHA Lender. We lend in MN, WI only
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Comment balloon 2 commentsJoseph Metzler • December 06 2010 02:47PM
Can you buy a home AFTER a short sale?
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Can you buy a home AFTER a short sale? We get asked this question just about everyday, so here are the FHA rules. --------------------------------------------- Short Sales Rules with FHA Financing A borrower is not eligible for a new… more