Wait to Get a Mortgage After Bankruptcy Reduced

Handling Bankruptcy cases in Waldorf, Lexington Park and throughout Southern Maryland we are often asked during bankruptcy consults how long will it be until I can buy a house.  As a result of recent FHA rule changes, in certain circumstances, the waiting period after bankruptcy, foreclosure, and short sales has been reduced to 1 year.  There are a number of caveats and conditions, but this is important information that needs to be passed on to anyone who has experienced any of these financial hardships and thought they would have to wait three years to have a chance to get a mortgage.

The FHA announced this in a letter to lenders.  The letter sets forth the parts of old rules that need to be amended in changed.  To read the actual letter see the link at the bottom of this post to see the FHA guidelines in there full bureaucratic beauty.  In essence the letter says Borrowers that may be otherwise ineligible for an FHA-insured mortgage due to FHA’s waiting period  to get a mortgage after bankruptcies, foreclosures, deeds-in-lieu, and short sales, as well as delinquencies and/or indications of derogatory credit, including collections and judgments is reduced to 1 year.

Waldorf and Lexington Park Bankrtupcy

U.S. Bankruptcy Court

A borrower may be eligible for an FHA-insured mortgage if the borrower can show they have that they have experienced an economic setback that was beyond their control such as a job loss or reduction in pay.  They also need to demonstrate that such an event it unlikely to occur again.  Finally, the applicant will need to have completed satisfactory Housing Counseling and meet all other HUD requirements.  

Please note “may be eligible” means they can give you loan, not that they have to give you a loan. In a recourse State like Maryland that allows the lender to come after the homeowner for any money left owing after the auction of a house it is unlikely that the lender will make a loan unless the mortgage company that foreclosed has agreed to forgive the debt.  Since this change has not received much public attention it is important that Realtors and Bankruptcy attorneys  reach out to anyone they have assisted with a deed in lieu, short sale or foreclosure and make them aware of these new rules.

Learn more about bankruptcy mortgage waiting periods.

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