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FHA Loans and Minimum Waiting Periods After Foreclosure: A Reader Question

June 3, 2014

105A reader asks, “After a foreclosure how many years you must wait for a new application?”

FHA loan rules governing this question can be found in HUD 4155.1, Chapter Four, Section C. That section states in part:

“A borrower is generally not eligible for a new FHA-insured mortgage if, during the previous three years

• his/her previous principal residence or other real property was foreclosed, or

• he/she gave a deed-in-lieu of foreclosure.”

FHA loan rules permit an exception to this waiting period,  IF the foreclosure can be documented as being, “…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.”

A common question about these exceptions involves divorce. Does the FHA view divorce situations as something that is beyond the borrower’s control and therefore worthy of an exception to the three year minimum waiting period?

According to Chapter Four Section C, “Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a borrower’s loan was current at the time of his/her divorce, the ex-spouse received the property, and the loan was later foreclosed.”

Potential borrowers interested in applying for an FHA loan for a new home purchase less than three years after a foreclosure should also know the FHA loan rulebook’s line about foreclosures that were the result of being unable to sell a home during a relocation due to a new job elsewhere or a job transfer to another area.

According to Chapter Four, Section C, “The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.” Discuss your specific circumstances with a loan officer to get help and learn what your FHA loan options may be.

Do you have questions about FHA home loans? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

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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