April 4, 2014
A reader asks, “Is there a time limit on getting a FHA loan after a short sale if you have stayed current on the mortgage payments?”
FHA loans following a short sale are possible, but the timing of the loan application may play a part in whether the loan is approved. For borrowers who were not current on the mortgage at the time the short sale occurred, a mandatory waiting time known as a “seasoning period” will apply.
The FHA Loan rulebook, HUD 4155.1, says “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 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 within the month due.”
That basically means the borrower must have been current on both mortgage payments and other personal debt. When applying for the new loan in such cases the borrower’s current FICO scores and other financial qualifications will be reviewed the same as on the original loan, so the borrower should insure 12 months of on-time payments have been made prior to the new loan application.
For borrowers who were not current on their mortgage loans at the time of the short sale, FHA loan rules say a three-year minimum waiting period is required. The lender may have additional standards above and beyond this rule but HUD 4155.1 spells out the basic rules quite simply:
“A borrower in default on his/her mortgage at the time of the short sale (or pre- foreclosure sale) is not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.”
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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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