What are the FHA guidelines for FHA mortgage applicants with a previous foreclosure or deed-in-lieu of foreclosure?
A FHA mortgage applicant is generally not eligible for a new FHA-insured mortgage if the FHA mortgage applicant had a foreclosure or a deed-in-lieu of foreclosure in the three-year period prior to the date of case number assignment.
The 3 three-year period begins on the date in which Title or Deed transferred from the FHA mortgage applicant.
If the credit report does not indicate the date of the foreclosure or deed-in-lieu of foreclosure, the FHA Mortgage Lender must obtain the Settlement Statement, deed or other legal documents evidencing the date of property transfer.
If the foreclosure or deed-in-lieu of foreclosure was the result of a circumstance beyond the FHA mortgage applicant’s control, the FHA Mortgage Lender must obtain an explanation of the circumstance and document that the circumstance was beyond the FHA mortgage applicant’s control.
The FHA Mortgage Lender may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the FHA mortgage applicant, such as a serious illness or death of a wage earner, and the FHA mortgage applicant has re-established good credit since the foreclosure.
Divorce is not considered an extenuating circumstance, however, an exception may be granted where a FHA mortgage applicant’s mortgage was current at the time of the FHA mortgage applicant’s divorce, the ex-spouse received the property, and the mortgage was later foreclosed.
The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.