The Federal Housing Administration is cutting the amount of time that homebuyers must wait after a bankruptcy, foreclosure or short sale to one year before they may qualify for an FHA-backed mortgage.

Previously, buyers had to wait two years after a bankruptcy and three years after a foreclosure or short sale.

But in order to qualify, borrowers will need to prove their household income fell by 20 percent or more for at least six months; that the income drop was tied to unemployment or another event beyond their control; that they have had at least one hour of approved housing counseling; and that they have had a full year of on-time housing payments, among other things.

Banks will likely have overlays to these rules, which have not been announced yet, so I will keep you posted as we know more on how this will play out.

 

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