New Waiting Time for FHA Borrowers In Default To Buy a New Home

August 26, 2013 at 12:37 pm Leave a comment

FHA borrowers who have filed for bankruptcy or had their homes recently foreclosed upon or sold via short sale may be eligible for another FHA loan just 12 months after the negative event.

The Federal Housing Administration will require borrowers to follow several requirements to become eligible: 1) Document (with W-2’s and/or tax returns) that the negative event was caused by at least a 20 percent loss in household income for at least a six-month period. 2) On-time rent payments for a period of 12 months. 3) Fully-recovered credit for at least 12 months after the negative event (meaning no collections, late payments, etc.). 4) The borrower has to show that previous negative credit appearing on the credit report was due to the loss in income rather than a history of late payments, collections or financial mismanagement.

As with any major rule change, investors modify these guidelines until they receive clarification from the FHA on exactly what they will and will not accept on these files before qualifying borrowers for loans using these new rules.

The government-backed loan program is easing up its conditions, making it easier and quicker for borrowers who defaulted on their loans to purchase a home sooner. The American dream of owning a home is closer to achieve. America is a “forgiving” country. You default on your loan and before you know it, you are back in the market for a new house.

In some ways, it is good to get a second chance at a new life in a new home. But in some other ways, it may not teach borrowers to be financially responsible. The collateral of the unpaid loan is the house itself and nothing more.

Other countries provide for stricter penalties on mortgage defaults, foreclosures or bankruptcy — including jail time, community service, garnishing wages, and requiring expensive collateral other than the home that defaulted.

Those types of consequences teach borrowers a lesson about financial responsibilty that many in this nation greatly need.

Entry filed under: Arizona Real Estate, Chandler Real Estate, Foreclosures & Short Sales, Phoenix Real Estate, Uncategorized. Tags: , , , , .

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