What is the FHA foreclosure waiting period?

Nice house with a sold signAccording to the Homeownership Preservation Foundation data of 60,000 homeowners. Good people can easily face a foreclosure by the lender. The causes of most foreclosures result from:

experience a job loss - 32%
experience a health crisis - 25% 
have already missed one mortgage payment - 85% 
have already missed two payments - 50% 
Most have no savings, no available credit, and their extended families have limited resources.
Most have first-time loans, and most loans are less than three years old.
They may have already refinanced two or three times.

Having a house foreclosure doesn't permanently stop you from acquiring another home. The FHA (Federal Housing Administration) allows home buyers to apply for an FHA mortgage after 3 years (prior to the date of FHA case number assignment on the new mortgage). This three-year period begins on the date in which title transferred from the Borrower to the lender.

The 3 year waiting period can be waived!

According to the FHA:

"The Mortgagee 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

The FHA does not consider a divorce as an extenuating circumstance, although, an exception can be granted where the borrowers mortgage loan was up-to-date at the time of the borrower’s divorce when the ex-spouse received the property, and the mortgage was later foreclosed.

Short Sale

Short sales are title transfers when the proceeds are less than the amount owed on the home and the lien holders agree to release their liens and forgive the deficiency balance on the real estate.

Borrowers who engaged in a short sale are generally not eligible for a new FHA-insured Mortgage if they relinquished a home through a short sale within three years from the date of new FHA case number assignment.

Exception for Borrower Current at the Time of Short Sale

A Borrower is considered eligible for a new FHA-insured Mortgage if, from the date of case number assignment 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.

Exception for Extenuating Circumstances Waiting Period


The Mortgagee may grant an exception to the three-year requirement if the Short Sale 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 Short Sale.

Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a Borrower’s Mortgage was current at the time of the Borrower’s divorce, the ex-spouse received the Property, and there was a subsequent Short Sale. FHA Handbook 4000.1 page 259