FHA after short sale?

[kellyb]

Hi,

I need to get a straight answer and maybe some help finding a bank/lender in the Portland OR area. My husband's job was transferred from Phoenix AZ to Oregon in July 2011. Due to this relocation we had to short sell our home in Phoenix however we were never late and we didn't miss any payments on the first or the second. The short sale was completed in December 2011. All of our other bills have stayed current and after the short sale our credit scores are in the high 600s and low 700s. We applied for and were approved for an FHA loan in June 2012 and have made a few offers on homes in the Portland area over the last few months. .

Last week our broker called to say the rules had changed and we couldn't qualify with FHA for another 2 years. Is this really the case? He mentioned something about "overlays" that his funders have related to extenuating circumstances. However everything I find online about FHA either says that extenuating circumstances don't apply to a short sale or that a job relocation qualifies as an extenuating circumstance. Can anyone clarify this? And, does anyone know how to find a lender that doesn't have overlays requiring such a long waiting period?

Thanks in advance for any help/answers you can provide!

Kelly

[Cat Damiano]

Hi,

I need to get a straight answer and maybe some help finding a bank/lender in the Portland OR area. My husband's job was transferred from Phoenix AZ to Oregon in July 2011. Due to this relocation we had to short sell our home in Phoenix however we were never late and we didn't miss any payments on the first or the second. The short sale was completed in December 2011. All of our other bills have stayed current and after the short sale our credit scores are in the high 600s and low 700s. We applied for and were approved for an FHA loan in June 2012 and have made a few offers on homes in the Portland area over the last few months. .

Last week our broker called to say the rules had changed and we couldn't qualify with FHA for another 2 years. Is this really the case? He mentioned something about "overlays" that his funders have related to extenuating circumstances. However everything I find online about FHA either says that extenuating circumstances don't apply to a short sale or that a job relocation qualifies as an extenuating circumstance. Can anyone clarify this? And, does anyone know how to find a lender that doesn't have overlays requiring such a long waiting period?

Thanks in advance for any help/answers you can provide!

Kelly

Welcome to the forum and thank you for joining................

For a new FHA mortgage after a short sale,

Borrower Current at time of Short Sale. A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all

• mortgage payments due 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.

Borrower in Default at time of Short Sale. A borrower in default on his/her mort­gage at the time of the short sale (or pre-foreclosure sale) is not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Note: A borrower who sold his or her property under FHA's pre-foreclosure sale program is not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale.



Exception. A lender may make an exception to this rule for a borrower in default on his/her mortgage at the time of the short sale if the

• default was due to circumstances beyond the borrower's control, such as death of a primary wage earner or long-term uninsured illness, and
• a review of the credit report indicates a satisfactory credit prior to the circumstances beyond the borrower's control that caused the default.

However the issue you are running into is investor overlays. Overlays are guidelines or requirements that lenders or investors put on top of the defined program requirements. Many investors have overlays unfortunately and those will require 3 or 4 years post short sale.

We would be unable to refer you to any specific lender. You can search for an FHA lender and see if there is one that can waive the waiting period here;

HUD FHA Lender List