A significant economic event, such as the loss of employment, beyond the borrowers control may explain away a prior short sale or bankruptcy and allow for the purchase of a homeThe economic crisis since 2008 has impacted many people, not the least of which who lost employment and therefore lost their home, either through bankruptcy or foreclosure or short sale. FHA has announced they will now consider extenuating circumstances when evaluating eligibility for a new home loan. Document hardship and document your Recovery Borrower must document the hardship was due to loss of employment or household income beyond their control, that they have demonstrated full recovery from the event, and has completed HUD counseling. Effective August 15, 2013 this is an opening for many families innocently impacted by the lousy economy over the past five years but have been able to reestablish themselves as a potential homeowner. Borrowers that would otherwise be ineligible for and FHA insured mortgage due to FHA’s mandatory waiting period for bankruptcies, foreclosures, deed in lieu of foreclosure, and short sales including derogatory credit may be eligible for and FHA insured mortgage. They must have established satisfactory credit for a minimum of 12 months and attend counseling from a HUD approved counseling agency related to home ownership and residential mortgage. Reestablish credit To reestablish credit means to have a credit history clear of late housing or installment debt payments and no late payments on any mortgage over the last 12 months. The requirements are very detailed and documenting that the borrower had solid credit and income prior to the economic event and then has been able to reestablish solid footing for at least 12 months after the event. It is a good thing we have institutions like nationaldebtreliefprograms.com debt relief programs to help you out. As always we will have to wait and see if there is sufficient investor support for this change. It is not enough for FHA to say it is so as FHA only insures a mortgage in the event it is not repaid and does not actually provide the funds – those must come from an investor. Quite often investors are slow to jump on new programs until a performance history can be established. A significant benefit to responsible families Add to that the relative high cost of an FHA insured mortgage these days, it will be important to balance acting now versus waiting for a time where a conventional loan would be available. If you want to read the details check out mortgagee letter ML 2013-26 I do think this will be a significant help to many families who lost their home only because of a dramatic reduction in income or job loss and not because they became irresponsible overnight. Many families have worked hard to reestablish credit and simply are blocked because of somewhat arbitrary guidelines. These changes will allow the most deserving of these folks get back in a home. Click here for a chart indicating how long you would need to wait before purchasing a home under normal conditions for Bankruptcy, Foreclosure, Short Sale and Loan Modifications. If you would like to talk with a mortgage advisor who thinks long-term and strategically about your financial investments including your liabilities – please give me a call.
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