FHA Short Sale Rules

 

With so many short sales taking place it’s important for you to know when a buyer will be eligible for a new FHA loan.  Here are the new guidelines issued in January 2010:

 Short Sales

 Borrowers with a short sale are not eligible for a new FHA loan:

 

  • if the short sale was done on a principal residence just to take advantage of a declining market and they purchased a similar or superior property at a reduced price within a reasonable commuting distance OR
  • for 3 years from the date of the pre-foreclosure sale or date that FHA paid the claim from the short sale (FHA loans only) if borrowers were in default at the time of the short sale. 

 

Borrowers are eligible for a new FHA loan if

 

  • the proceeds from the short sale serve as payment in full AND
  • all mortgage payments were made within the month due for the 12 months preceding the short sale AND
  • all installment debt for same period was paid within month due OR
  • the following exception applies:
    • default due to circumstances beyond borrower’s control AND
    • borrower had previous good credit history prior to default trigger event.