HUD Announces Significant Change in FHA Guidelines

In August, HUD announced revision to FHA lending requirements which could allow those who experienced a foreclosure, short sale or bankruptcy the ability to re-enter real estate market sooner.

With 547 San Benito County properties sold by short sale or foreclosure since Jan. 2012, according to MLS stats, the local community has certainly been affected by the economy. However, home prices are now on a steady incline and with historically low interest rates, many former homeowners are clamoring for a way to get back into the real estate market.

In August, HUD announced a significant revision to FHA lending requirements which could allow for those who experienced a foreclosure, short sale or declared bankruptcy the ability to re-enter the real estate market sooner than previously allowed under the former guidelines.

Prior to this revision, potential borrowers who had experienced a foreclosure, short sale or bankruptcy required a minimum three year waiting or ‘seasoning’ period before being able to obtain a mortgage loan. HUD’s new revision changes the seasoning period to just one year. While many view this as exciting news for those eagerly awaiting re-entry to the upward moving real estate market, it may not be that cut and dry. “Whether or not underwriters approve these loans is another story,” states Suzanne Martindale, local loan officer and former DE underwriter with Guild Mortgage. “As with other types of lending products, each person is unique as are lending institutions. Some may aggressively reach out to these consumers, while others may make it difficult to qualify based on more conservative internal lending requirements.” Martindale affirms.

HUD’s new requirements also state individuals must prove experiencing an economic event such as job loss, causing a 20 percent decrease in household income for a minimum of six months. Additionally, HUD counseling and a satisfactory credit history must be maintained for the most recent twelve months or longer.

So what’s the bottom line? This is a considerable revision made by HUD and could open the door to many local residents further supporting the continued rise in the real estate market. Furthermore, Realtors® and lenders work with clients in all ranges of financial situations so potential buyers shouldn’t be uneasy about asking questions if they think they may be ready to enter the market.

cjthorning

Carla Thorning is a Hollister native and mother of three. She is a Development Consultant for BenitoLink and a Realtor with Bertao Real Estate Group. She has a professional background in marketing and real estate and is also a graduate of Colorado State University. She serves as the Vice President of the Kelly Marie Freitas Memorial Fund, an endowment fund of the Community Foundation for San Benito County. BRE #01495211