Cynthia Alfred's Blog

…what happens?  When can I purchase a home again?  How long will it affect my credit?  Is it worse than a foreclosure?  Can the bank come after me for the difference between the sales price and my current loan?

It’s a fact that short sales are on the minds of many people and the Federal Housing Administration (FHA) has taken notice.

On December 6, 2009, FHA rewrote their borrower eligibility guidelines for short-sellers looking to once again own a home.  These changes went into effect immediately, and for any past homeowner that has gone through a short sale, these changes are huge!

If you stayed current on every bill you had–including your mortgage for the last twelve months–while going through the short sale process, you can purchase another home the day after your short sale closes.  According to FHA’s Mortgagee Letter 09-52, as long as you did not pursue a short sale agreement simply to “take advantage of declining market conditions, and purchase at a reduced price a similar or superior property within a reasonable commuting distance” then you are eligible for an FHA insured loan.  However, if you were late on your mortgage, late on any revolving debt, or in the process of foreclosure while going through your short sale, then all bets are off.  Potential buyers in cases such as this have to wait a mandated thirty-six months (three years) before purchasing a home through FHA.

So while many of the original questions in this column remain a mystery solved only on a “lender-to-lender” case-by-case basis, we now have a nationally recognized policy for how shortly after a short sale you can purchase a home.

Brentwood Press, Trevor’s Weekly Mortgage Matters, Trevor Frey,  February 19, 2010