Federal Housing Administration Offers Insurance for Buyers Previously Foreclosed

The Federal Housing Administration announced earlier this week they will offer homeowners who lost their homes during the recession due to foreclosure or short sale a chance to get back into the housing market. According to a letter sent to mortgage lenders, the FHA is offering to provide mortgage insurance to borrowers who previously would not qualify for a home loan only because of having a record of losing their home through foreclosure, short sale or bankruptcy.

The insurance will allow those who have lost their home in the past but meet all other FHA requirements will now be able to qualify for an FHA loan to purchase a home.

“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,” the letter says.

At least a year must have passed since the home loss and borrowers will have to provide proof of economic stability as well as complete housing counseling. Additional proof will have to be provided that the previous home was lost due to an “economic event” that resulted in a minimum loss of 20% of household income.

This opens up opportunities to a whole new pool of buyers that were otherwise forced from the market due to past economic distress. It hasn’t been announced what the additional mortgage insurance rate will be, but still expect demand to go up for homes that are already difficult to find – those starter homes under $130K – as these former home owners look to start over after the recession.

To learn more about financing options available to you, call Robert at 512.791.0229 for a free consultation about the home buying process.

Source: Housingwire.com