November 17, 2016
What are the FHA loan requirements for getting a new FHA loan after a deed-in-lieu of foreclosure? One reader got in touch with us recently to ask: “I completed a deed in lieu about three months ago. According to the government guidelines, how long do I have to wait before I can refinance or purchase a home?”
The rules that govern FHA deed-in-lieu of foreclosure policy are found in HUD 4000.1, which state:
“A Borrower is generally not eligible for a new FHA-insured Mortgage if the Borrower had a foreclosure or a DIL of foreclosure in the three-year period prior to the date of case number assignment. This three-year period begins on the date of the DIL or the date that the Borrower transferred ownership of the Property to the foreclosing Entity/designee.”
That information is found on page 247 of HUD 4000.1. There are some exceptions to this FHA policy, which can be found in the same section as the information above.
According to the rules, the lender is permitted to grant an exception to the three year waiting period following a deed-in-lieu “if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the Borrower, such as a serious illness or death of a wage earner, and the Borrower has re-established good credit since the foreclosure.”
Some issues are not considered extenuating circumstances. Divorce is one of those, with a caveat. “An exception may, however, be granted where a Borrowers Mortgage was current at the time of the Borrowers divorce, the ex-spouse received the Property, and the Mortgage was later foreclosed.”
HUD 4000.1 adds, “The inability to sell the Property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.”
The lender will require documentation, and may require the borrower to provide a written verification of the circumstances that would enable an exception under the rules.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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