FHA guidelines for derogatory credit information Part Two

FHA guidelines for derogatory credit information Part Two

This is part two of the continuing series on the length of time required to get detrimental information off your credit file for an FHA loan.


For an FHA loan (the credit information is determined by the date of credit approval.)



Deed in Lieu of Foreclosure

Foreclosure: Home was given back to the bank-No owner participation

3 years from date foreclosure completed and transferred back to bank

Less than 2 years, but not less than 12 months from date foreclosure completed and transferred back to bank may be acceptable if the result of acceptable extenuating circumstances.


Short Sale

Short Sale: Home sold but sales price did not cover amount owed

3 years from date sale closed and transferred to new owner

No waiting period if borrower had no late payments on any mortgages and consumer debts within the 12 month period preceding the short sale AND they are not taking advantage of declining market conditions.


Bankruptcy Chapter 7

Debts are discharged through bankruptcy, client does not pay any debts owing

2 years from date of discharge with re-established credit paid as agreed or no new credit obligations incurred.

Less than 2 years, but not less than 12 months from date of discharge may be acceptableif the bankruptcy was caused by acceptable extenuating circumstances and borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.


Bankruptcy Chapter 13

Debts paid back on a monthly scheduled payment plan by client

1 year payout period under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory and all required payments made on time.


Extenuating circumstances for an FHA loan can include the following: Serious illness or death of a wage earner. Divorce and the liability to sell a property due to job transfer or relocation to another area does not qualify as an acceptable extenuating circumstance.



Source: Article:ThinkBigWorkSmall; The Real Estate Source(pub)


Michael Bray Headshot
Phone: 915-549-1770
Dated: October 17th 2012
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