Short Sale Rules!

The good news is that borrowers who went through a recent short sale may be eligible for FHA financing if:

1. They were current on their mortgage and other debts at time of short sale.

2. The proceeds from the short sale serve as payment in full.

Borrowers in default on their mortgage at the time of short sale or pre-foreclosure unfortunately have to wait 3 years from the date of pre-foreclosure sale to be eligible for FHA financing.

Borrowers that went through a recent short sale may be however be eligible for FHA financing if:

1. They were current on their mortgage and other debts at time of short sale.

2. The proceeds from the short sale serve as payment in full.

Borrowers in default on their mortgage at the time of short sale or pre-foreclosure have to wait 3 years from the date of pre-foreclosure sale to be eligible for FHA financing.

A few exceptions can be made such as:

1. 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

2. Credit was good prior to the exceptional circumstances.

Unfortunately most short sales will damage the credit of the seller/future borrower but can be a better alternative to bankruptcy. The words "Short sale" also doesn't show up on credit reports. They instead record "Paid and Settled". A property that has been in good standing and paid off shows up as "Paid and Satisfied". Notice the difference.