Last month, FHA released yet another mortgagee letter clarifying FHA’s position regarding borrowers who recently had a short sale on a primary residence and want to purchase a new primary residence using an FHA loan.
Summarized below are a few of the key points:
1) These changes are effective immediately
2) Borrowers are not eligible for new FHA financing if they pursued a short sale agreement on his or her principal residence simply to:
- Take advantage of declining market conditions, and
- Purchase ,at a reduced price, a similar or superior property near the residence they completed a short sale on (this is a key point)
3) Borrowers are eligible for new FHA financing if:
- All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
- All installment debt payments for the same time period were also made within the month due, and
- The proceeds from the short sale serve as payment in full (another key point)
4) Borrowers whose mortgage was in pre-foreclosure status at the time of short sale are not eligible for FHA financing for 3 years unless they qualify for an exception
So yes, this means if you just sold your home via short sale you COULD qualify to purchase another home through an FHA loan (if eligible based on the requirements above) without waiting 2-3 years.
If you have questions or want to see if you are eligible, contact Kelly Zitlow at Suburban Mortgage, kzitlow@submort.com or 480-355-8105.
Kelly Zitlow, Suburban Mortgage, BK #10123
Taking effect on February 1, 2010 and currently effective for one year, FHA borrowers will no longer have to wait 90 days to purchase a home that was recently acquired by another buyer with intent of “flipping” the home. Initially, the “no flip rule” was implemented to protect FHA borrowers against predatory practices. Cash buyers are purchasing homes at auction and reselling at inflated prices, often to unsuspecting buyers. Many times, these homes are badly damaged, fixed up, and relisted for a profit. Until now, an FHA borrower would have to wait 90 days to purchase such a home. 
higher! The Federal Reserve’s Mortgage Backed Security purchasing program is set to expire in March of this year. We have already seen rates trend higher with the Fed’s reduced purchasing power in the market.