Good News for FHA Buyers

Guidance on Borrowers current at the time of Short Sale Borrowers are considered eligible for a new FHA-insured mortgage if they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and the proceeds from the short sale serve as payment in full. Reference: For detailed information, see “Short Sales” at 4155.1 4.C.2.l.

TRANSLATION: If a homeowner/borrower didn’t miss any payments prior to or during a short sale transaction AND their overall credit history has not been impacted, they CAN buy immediately following a short sale using FHA financing. The focus seems to be on rewarding those who made their payments on time--those who chose to do a short sale versus those who missed payments prior to a short sale. Another key is the demand letter from the existing short sale lender must show that they are accepting the proceeds as payment in full.

Please note, short sellers using the new HAFA program wouldn’t be eligible for new financing for 3 years because to be eligible for HAFA you need to be seriously delinquent.