Buying a home after foreclosure: Help from the FHA

The Wall Street Journal reports that thousands of people who lost their houses in foreclosure are back in the market for a home.  The FHA will insure mortgages (for a fee) in as little as three years after a foreclosure, and many people whose houses were foreclosed on as late as 2009 are using that guarantee to get a mortgage on a new home.

The article cited one case of a 24-year old couple that bought a $315,000 house in San Diego’s Mission Valley Area in 2006 with a teaser-rate loan.  When the interest shot up and the wife became pregnant, they were overwhelmed.  They lost the house in 2009.  Now they are buying a $280,000 new home under construction in Chula Vista, where their mortgage payment will be lower than the one they had before.

The Journal points out that “there is a web of rules for when and how people have lost homes to foreclosure or short sales or have gone through bankruptcy can become eligible for a new mortgage,” but three years is typical for a straight foreclosure or short sale, and if you did a “Chapter 13″ bankruptcy, you could qualify for an FHA-backed loan in as little as a year.

One thing to keep in mind:  There are new, stricter, underwriting requirements for these loans and all borrowers have to meet them.

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