The Federal Housing Administration (FHA) has recently announced that it is cutting the waiting period for people who have experienced a bankruptcy, foreclosure, short sale or deed-in-lieu. This is exciting news because FHA loans are a significant source of mortgages, allowing people with good credit and a solid work history to have a low-down-payment loan. Previously FHA had announced that it would require any individual to wait three years or more after one of these economic setbacks before it would consider him or her for a mortgage. These loans are especially appealing to banks and other lenders because they are insured by the government against default, while also making it possible for people with less savings or less-than-perfect credit to own their own home.
The new, shorter waiting period applies to those who experienced (and can document) a loss of work and loss of income that was beyond their control. Borrowers must also prove that they have recovered from this loss and have sufficient stable income/employment. Additionally, they must show a satisfactory credit history for at least 12 months prior to the loan application and must complete “housing counseling”.
The goal is to help those who were hurt by the recent recession regain home ownership and to stabilize the current housing market.
If you have delayed looking for a home due to economic circumstances and you feel you can meet the current guidelines, contact your local bank or mortgage company for more information on the new FHA requirements. They will help you determine whether you qualify for a loan, what steps you might need to complete in order to become qualified, how much money you will need to set aside for down payment and other costs, and how much home you can afford with your current income.