You now have to wait only one year after a bankruptcy, foreclosure or short sale to qualify for an FHA loan. The period had previously been two years following a bankruptcy, and three years following a foreclosure or short sale.
To qualify for this exception, 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. They must also demonstrate that they have fully recovered from the event, and agree to complete housing counselling prior to closing. If you can not demonstrate the significant decrease in income which lead to the economic hardship, the normal wait periods apply.
FHA states: "As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. 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".
Call me for details regarding the full qualification requirements.
The full mortgagee letter is linked here: HUD ML 13-26
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