By Hudson Sangree
(MCT)—Homeowners who were laid off and lost their homes to foreclosure could qualify for a new mortgage in as little as a year under an unprecedented federal rule change that slashes the usual waiting period between financial disaster and buying a new house.
Normally, homeowners who were foreclosed on must wait three years before they can qualify for a loan backed by the Federal Housing Administration. FHA loans require only a 3.5 percent down payment and have more lenient lending standards than conventional loans, though borrowers have to carry long-term mortgage insurance. Getting a conventional loan after foreclosure can take up to seven years.
The new changes allow borrowers who meet a set of strict criteria to qualify for an FHA loan only 12 months after losing their house for failure to make payments.
“To get A-paper institutional financing so soon after a foreclosure is unheard-of,” says Brent Wilson, with Comstock Mortgage in Sacramento, Calif. “It should increase the buyer pool throughout the country.”
The FHA announced the changes Aug. 15 in a letter to lenders titled “Back to Work: Extenuating Circumstances.” Officials say it was meant to acknowledge the reality of the recession, with its mass layoffs, and to help people return to homeownership.
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