As reported in dsnews.com Â â€“ Aug 19th 2013-
The Federal Housing Administration (FHA) is
allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or
short sale to reenter the market in as little as 12 months, according to a
mortgage letter released Friday.
Borrowers who experienced a
foreclosure must wait at least three years before getting a chance to get
approved for an FHA loan, but with the new guideline,
certain borrowers who lost their home as a result of an economic hardship may
be considered even earlier.
For borrowers who went through
a recession-related financial event, FHA stated it
realizes â€œtheir credit histories may not fully reflect their true ability or
propensity to repay a mortgage.â€
In order to be eligible for the
more lenient approval process, provided documents must show â€œcertain credit
impairmentsâ€ were from loss of employment or loss of income that was beyond the
borrowerâ€™s control. The lender also needs to verify the income loss was at
least 20 percent for a period lasting for at least six months.
Additionally, borrowers must
demonstrate they have fully recovered from the event that caused the hardship
and complete housing counseling......
I spoke to this
very early on during the housing crisis both at my seminars and to individual investors and felt very strongly that once the
recovery got on the way banks and other institutions will begin to relax the
rules to make it easier for those who underwent the Short Sale &
Foreclosure to get back into the market quickly.
We must also remember that large investors and
hedge fund group like Blackstone Group, Warren Buffet, etc. bought up a whole
lot of properties which they rented with the intention of selling back to the
renter. These players also have strong influence and so they can guide policy
makers to meet their business models.
Now when relaxed
rules make it easier for renters to borrow again they will certainly be looking
to purchase instead of rent. Â So if your
strategy is to buy, rent and hold property for a period of time I continue to
advise to buy properties in areas that will remain attractive. Areas that will
continue to support the demand for rental traffic such as areas with good
employment, areas that have good economic growth, areas where the rent to
income ratio will be low.