A new ruling is coming down the pipeline that will pave the way for once-struggling homeowners to qualify for an FHA mortgage.
The Federal Housing Administration has announced in a letter to mortgagees that it will reduce the time homebuyers must wait after a bankruptcy, foreclosure or short sale before qualifying for an FHA loan. Before the wait time was two years following the discharge of a bankruptcy, and three years following a foreclosure or short sale in addition to establishing new credit and having no late payments after the event.
The agency will reduce the wait period to one year.
"FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage," per FHA Commissioner Carol J. Galante this week.
But fulfilling the new, more lenient waiting period won't automatically qualify borrowers for an FHA-backed loan. Borrowers will have to show that they experienced an "economic event" whereby their household income fell by 20% or more for a period of at least six months.
Applicants must also show and explain how they have fully recovered from the event, and agree to complete housing counseling prior to closing.Carol J. Galante began her service as the Assistant Secretary for Housing/Federal Housing Commissioner on December 30, 2012. Prior to confirmation, Galante was Acting Assistant Secretary for Housing/FHA Commissioner.
As FHA Commissioner, Ms. Galante watches over and manages the FHA’s trillion dollar insurance portfolio, which includes single family and multifamily housing.Caroline Gerardo, NMLS # 324982 phone (949) 637-8190