This week, the Federal Housing Administration trimmed the amount of time people have to wait until they can qualify for a home loan mortgage to one year after bankruptcy, short sale or foreclosure. The previous timeframe had been two years.
There are details, though. Applicants will need to prove that their household income fell by 20 percent or more for at least six months and that the loss on income was tied to circumstances beyond their control. In addition, they will need to complete an hour of “housing counseling” and be current on any rent payments or other housing payments at the time of application for the FHA-backed mortgage.
Since the FHA has mostly taken over the home lending industry these days, this policy change should significantly affect the number of new loan applications in the next year. It will likely come as welcome news to those renting in Central PA, waiting for their foreclosure to be gone two years before trying for another home purchase.
I know I have talked with many who are in this situation over the past few years. Access to the low-down payment mortgages underwritten by the FHA will be a helpful option for them.