The real estate market is not always kind. I have had friends and clients who purchased a home when the market was up and through the roller coaster ride of the market years later, are forced to sell their homes at a loss. This financial loss can be devastating but it is nothing compared to the emotional toll it can take. My friends have confided they felt embarrassment and confusion during the process and for years after.

If you had to sell your home through a short sale, bankruptcy or foreclosure, I want you to know two things. 1) You are not alone and 2) Your goal of home ownership is not over.

Short Sales
According to the Department of Housing and Urban Development, borrowers are considered eligible for a new FHA-insured mortgage after 2 years if:

• They were current on their mortgage and other installment debts at the time of short sale of their previously owned property, and
• The proceeds from the short sale serve as payment in full.

Borrowers in default on their mortgage at the time of short sale are not eligible for three years, EXCEPT:

• The default was due to circumstances beyond the borrower’s control (such as death of primary wage earner, long term un-insured illness, etc.), and
• The review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default.

Foreclosures
According to Fannie Mae, for borrowers with documented extenuating circumstances, a 3 year wait period is required for the following exceptions:

• Lesser of 90% LTV ratio or maximum per the Eligibility Matrix.
• Documented extenuating circumstances

Bankruptcy
The new wait period is 2 years, provided there is documented extenuating circumstances.
**Individual lenders may have additional criteria that must be met. Speak with your lender for additional information.

Source: www.hud.gov – Mortgagee Letter 09-52
Source: https:/www.fanniemae.com – Announcement SEL-2010-08