Wow! You are a great source for knowledge! I'm still confused, though. I've been turned down by 6 FHA lenders because I included my home in a bankruptcy in 2009 but stayed in the home and continue to pay on time every month without fail. The problem? I don't have a reaffirmation agreement with Wells Fargo. I'm an unusual case, it seems. Appears most people leave their bankrupted home. I'm wondering if the lenders really don't know where to put me? If the conventional mortgage I have now is not foreclosed and current, why don't I fall into the bankruptcy FHA guidelines? I have no idea how to get into a new home. :( Conforming loan also passed us up for the same reason. No one has even asked what our bank acct looks like or what our intent with our current home is.
As is true with most rumors, there is a significant amount of truth woven into this conversation.
As of the date this article is being written, I have sorted through the facts, speculation and rumor to help make sense of the fragmented information available about this topic online.
FHA May Waive It’s 3 Year Foreclosure Waiting Period
This news story originated on September 10th, 2012. Shortly afterwards the news of FHA waiving it’s waiting periods spread throughout the internet on many real estate, mortgage and news sites – I suspect to attract readers to their websites.
If FHA does waive its waiting period, it will be national news and we will all know about it
While this may indeed have been a topic of discussion and maybe even consideration, fact is, we haven’t heard a peep since. At this point it is only a “rumor”.
Trust me when I say that if FHA does waive its waiting period, it will not be a secret. This would be national news and we will all know about it
Buy Again 1 Day After BK, Foreclosure or Short Sale
Currently, FHA will allow a buyer to buy a home 1 day out of bankruptcy if the hardship was the result of extenuating circumstances completely outside the borrower’s control.
Following is an excerpt directly from the FHA Underwriting Manual regarding Extenuating Circumstances:
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.
Exception: The lender may grant an exception to the three-year requirement if the foreclosure was 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.
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.
Note: The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.
Video Library: Buy Again Sooner with Extenuating Circumstances
Current FHA Waiting Periods
FHA will allow a borrower to qualify for a home loan for a primary residence after meeting the following specified waiting periods:
- 3 years after foreclosure, short sale or deed in lieu of foreclosure
- 2 years after discharge of a chapter 7 bankruptcy
- 1 year after discharge of a chapter 13 bankruptcy
We have a whole series in our video library about buying after bankruptcy, foreclosure or short sale. Waiting periods depend on two factors:
- The hardship
- What type of financing you’re using
Video Library: View all Buy Again Timelines Here
Branch Manager at Broadview Mortgage Long Beach, California, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (562) 999-1355 or ScottS@broadviewmortgage.com
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Thanks for your viewpoint. I've been following this closely after my loan application (using extenuating circumstances) was denied. By next June it'll have been three years since my short sale. By then the 3.5% down may be gone and the MIP may be for life. I had stellar credit before my short-sale, and have a FICO of 708 (improved over the past years). It amazes me that I have to wait this long, yet people who file bankruptcy have shorter periods.
@mnasmom3 I don't think the problem is that you didn't reaffirm the mortgage. The issue may be that you do not income qualify for both the old mortgage and the new mortgage. What are your intentions with your current home? Do you plan to rent it out or sell it? FHA guidelines would not prevent you from buying a new home as long as it's been 2 years from the discharge of the bankruptcy AND you meet all other income, asset and qualifying guidelines. You are unable to qualify for some reason other than the reaffirmation, I'm confident of that. What State are you in? You may email me directly with additional questions or call me on my cell phone. My email and cell are above in the Author profile.
@acushman There's no question it's very difficult to get an exception under extenuating circumstances rules. Other than death of a wage earn or permanent disability, I have seen little success.
By any chance do you have a 20% down payment? Conventional financing will allow you to buy after 2 years with 20% down and a minimum 680 credit score.
Other than that, we're monitoring this story for updates!