A reader recently sent us a lengthy comment as part of a request for assistance on FHA loan topics.
He writes, “I had a foreclosure in a bk chap 7 that was discharged in Nov 2009. This was due to a job lost in 2008 like most of the country. I had to get unemployment for I went over one year looking for another job. I went back to work full time in Dec 2009…”
We won’t reproduce the entire correspondence here, but we thought it important to address the issues mentioned above as there are plenty of other readers who may be facing similar circumstances. Is it possible to get a new FHA home loan with conditions like the ones previously mentioned as part of the borrower’s history?
Let’s examine each part of the quote from our reader’s communication:
“I had a foreclosure in a bk chap 7 that was discharged in Nov 2009.” FHA loan requirements state the borrower must wait a minimum of two years before applying for a new FHA mortgage after Chapter 7 bankruptcy. Similar minimum wait time requirements apply for foreclosure proceedings. This is known as a “seasoning period” in some circles, and many lenders require a three-year wait as opposed to the FHA’s minimum two year requirement.
These longer wait times are not illegal or prohibited by FHA loan rules. In this case, in November of 2012 the reader will have three years since the bankruptcy was discharged and may be eligible to apply for a new FHA home loan with most lenders. The borrower must qualify for the new FHA mortgage loan in the same way he or she would for any other home loan application.
“I had to get unemployment for I went over one year looking for another job. I went back to work full time in Dec 2009…” The borrower has more than two years of employment history at this point, so there should be no worries there in a general sense. An individual borrower needs to show stable employment and income history, but these factors are flexible depending on circumstances.
A lender must verify current income and employment to judge whether current income is stable and likely to continue. Simply having a new job is not enough to disqualify you from an FHA guaranteed loan, but the lender will look for evidence that a new job is “likely to continue”.
These types of situations are handled case-by-case, and borrowers should never assume they aren’t eligible for an FHA loan until they’ve been denied or told they are not eligible by a lender or FHA representative. There may be ways to appeal or provide compensating factors that could make an FHA loan application more favorably considered.