A_garcia, Home Buyer in Kansas City, KS

What is considered a financial hardship to be approved for an FHA loan after a short sale?

Asked by A_garcia, Kansas City, KS Mon Jul 11, 2011

I keep being told I do not qualify for an FHA loan until 3 years after a short sale, but then I read you can be approved if you show that there was a hardship? We had to prove hardship to the bank when we did the short sale-basically a major decrease in salary with an adjustable rate on AZ.

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Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Tue Jul 12, 2011
Yeah although it sounds like their was an income cut, it doesn't sound like it'd be considered an extenuating circumstance per what most lenders would define. Not saying that there isn't 1 bank out there that may see it differently, but I don't think the odds would be in your favor.
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A_garcia, Home Buyer, Kansas City, KS
Tue Jul 12, 2011
No, it was simply a major budget restructuring at the school district my husband worked at. It forced us to start looking at other job options, which, ended up working in our favor as we got lucky and both found higher paying jobs in another city after the short sale. But Bank of America approved us for a short sale based on a hardship letter, bank statements at the time etc.
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Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Tue Jul 12, 2011
The adjustable rate wouldn't be a reason for hardship, as you agreed to the loan terms in writing by signing the document. However the reason for the major decrease in salary could very well be what is called an "extenuating circumstance", such as

- an accident
- a medical condition/illness
- the death of a wage-earner
- divorce (like if you were divorced and the spouse was responsible for the mortgage but it was on your credit)
- and even unemployment in rare situations (such as the situation of a plant closing, a "mass layoff" - this will be accompanied by a layoff notice as described in the WARN Act).

Did any of the above describe the reason for your major decrease in salary?

Worker Adjustment and Retraining Notification (WARN) Act Compliance Assistance Materials: http://www.doleta.gov/layoff/warn.cfm
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