Purchse a Home after Short Sale via FHA financing

sedonaLast 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

FHA waives 90 Day Flip Rule

real_estate5Taking 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. 

The announcement is part of the Obama administration commitment to addressing foreclosures. 

This waiver is limited to those sales meeting the following general conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.  
  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost the waiver will only apply if the lender meets specific conditions.
  • The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

If you are a buyer and want to know if a specific home qualifies, please contact The Aladin Group at info@thealadingroup.com

to do the appropriate research.