Buying After Short Sale

and other Rules for Special Circumstances

FHA will allow a borrower to purchase another home immediately after a short sale IF their mortgage was not delinquent in the last 12 months.

If there were any late mortgage payments in the last 12 months, BUT the mortgage has been brought current at the time of short sale, the FHA will allow purchase after one year. 

If mortgage is past due at the time of short sale, the buyer must wait 3 years.  However, exceptions can be made to the 3 year waiting period if the cause of the short sale is deemed to be related to circumstances beyond the buyer's control.

Examples include:  medical illness, loss of primary wage earner's job, death, etc.

Foreclosures

Borrower must wait 3 years from the date of foreclosure.  Exception can be made after 2 years if the property did not have an FHA loan and was due to circumstances beyond their control.

Bankruptcy - Chapter 7

2 year waiting period.  Exceptions can be made after one year if circumstances beyond borrower's control. 

Loan Modification

If a borrower is currently in a temporary loan modification, they are unable to get an FHA loan until they are out of modification for one year. 

If the borrower's loan modification is a permanent one, they can get and FHA loan at anytime. 

Special Circumstances

BUYING A HOME WITHOUT SELLING CURRENT HOME

If the property has 25% equity, based upon the original sales price or current appraised value, a lease my be used to offset the mortgage payment.  If the primary home does not have sufficient equity the borrower must qualify without the benefit of any rental income.

FLIP RULE

FHA has temporarily waived the Flip Rule.  Investors can purchase properties and sell with no waiting period.  In many cases, 2 appraisals and a home inspection will be required.

CONDO REQUIREMENTS

Property must be FHA approved- a process that can take up to 60 days.  In addition: 51% of the units must be owner occupied, less than 15% of the units can be 30 days delinquent in condo fees and no one owner can own more than 10% of the units.  

MORTGAGE INSURANCE

Up Front Mortgage Insurance is 1% and monthly is 1.15%.