FHA Mortgage Eligibility: Short Sale or Foreclosure

by Vickie in Gastonia and by Beverly from Westerville

Ask Kate about FHA mortgage eligibility after short sale or foreclosure: Vickie needs a cash-out refinance to pay bills after her divorce. But her lender said, due to her short sale 2 years ago, she has an additional 2 years before she will get mortgage approval. In spite of her short sale, I'm not so sure a 4 year waiting period should apply to Vickie!

Beverly wants to know which date a lender uses to start the clock ticking for mortgage eligibility after foreclosure.

Cash-Out Refinance After Short Sale

By Vickie in Gastonia, NC
Cash-Out Refinance After Short Sale


Can I refinance my current mortgage since I had a short sale Nov 1, 2012?

I need to refinance my condo as I have just divorced. I need money to pay my ex-husband and pay off some bills.

I paid $133,000 for my condo and it is now worth $145,000. I owe $11,000 and need to borrow $50,000.

Who should I talk to about the refinance? I was told by Silverton Mortgage It had to be four years after the short sale before I could refinance.

Please help me. Thank you.

***zz-portrait-left.shtml*** Ask Kate answers: Cash-Out Refinance After Short Sale

Hi Vickie,

Don't stop pursuing the refinance after speaking with only one lender!

Typically, there IS a waiting period after a real estate short sale. But the waiting period is not as extensive as it would be after foreclosure.

Hopefully, you were current on your mortgage payments at the time of the short sale since asking for a cash-out refinance is considered risky by lenders. Regardless, you should have a better chance at a shorter waiting period since your loan-to-value (LTV) is so low, about 35%. Here's how to calculate LTV.

FHA Financing After Short Sale

I suggest looking into the FHA refinance even though it's often thought of as a loan program for homeowners with little equity or home buyers with minimum down payments.

I say this because FHA guidelines offer a shorter waiting period after short sale than conventional mortgage programs, for example, Fannie Mae or Freddie Mac backed loans.

The downside is that you'll be required to pay FHA mortgage insurance (MIP), in spite of your equity. So talk with an FHA approved lender about ways to minimize the MIP.
You will also want to read Ask Kate how to Refinance a Mortgage After Short Sale.

Home buyers with a short sale or foreclosure in their recent history will want to know about Back to Work by FHA: Buying a Home After Foreclosure.
Best wishes,


Getting Mortgage Financing After Foreclosure

By Beverly from Westerville, OH
Getting Mortgage Financing After Foreclosure


I had a foreclosure and the house was sold at sheriff's sale in September of 2012. But my name was not taken off the house until November of 2012.

I know there is a 3-year waiting period to get an FHA mortgage. Does the 3 years start from the date of the sheriff sale or when my name was removed from the house?


***zz-portrait-left.shtml*** Ask Kate answers: Getting Mortgage Financing After Foreclosure

Hi Beverly,

The majority of distressed homeowners have enough on their plates at the time of foreclosure to be asking what date determines future mortgage eligibility! So this is a great question!

When the lender files a deed of reconveyance, the homeowner's name comes off the title to the home. In general, lenders use the date that the deed is recorded to start the clock ticking for mortgage eligibility.

You can check with your local county tax assessor's office to find out the date of the recorded deed. (In some states, a satisfaction of mortgage document replaces the deed of reconveyance.)

Kathleen asked a similar question about getting FHA financing after bankruptcy and foreclosure. You can see my answer at Qualifying for a Home Mortgage Without Losing Sleep. (Keep reading until you reach the comment section near the bottom of the page.)

Best wishes,


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FHA waiting period after loan modification
by: Phil V. from Medford, NJ

I'm applying for a new rate and term FHA refinance to pay off 2 existing conventional mortgages. The 1st mortgage was modified over a year ago. Is there an FHA waiting period for loan modifications, like there is for BK's and short sales?

Hi Phil, Kate here...

If the terms have been met after a economic event which caused the need for a modification, there might not be a waiting period. However, I would urge FHA borrowers to prepare for a one year waiting period, during which they pay close attention to making all payments on time.

You can read more about economic events at Back to Work by FHA - Buying a Home After Foreclosure.

Best wishes, Kate

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You can also ask Kate about your mortgage at How to Improve Your Credit Rating with Amazing Success.

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