The Federal Housing Administration is cutting the amount of time that homebuyers must wait after a bankruptcy, foreclosure or short sale to one year before they may qualify for an FHA-backed mortgage.

Previously, buyers had to wait two years after a bankruptcy and three years after a foreclosure or short sale.

But in order to qualify, borrowers will need to prove their household income fell by 20 percent or more for at least six months; that the income drop was tied to unemployment or another event beyond their control; that they have had at least one hour of approved housing counseling; and that they have had a full year of on-time housing payments, among other things.

“FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage,” said FHA Commissioner Carol Galante, in a letter to mortgagees announcing the changes.

Source: Chicago Tribune

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