Sacramento Association of REALTORS® Web Log

• A signed, written statement from the borrower’s third-party and documentation confirming that this was an isolated occurrence that significantly reduced the borrower’s income and/or increased their expenses
• No evidence that the borrowers had unacceptable credit prior to the problems
• Evidence that the borrowers have reestablished acceptable credit with at least four references for at least two years, including one traditional credit reference (an account that would appear on a credit report), and one housing related reference (e.g. a PG&E, SMUD or Comcast bill).

• Evidence on the credit report and other credit documentation that the borrower’s present credit is current
• Evidence that no new public records, no 60-day late payments, no more than two 30-day late payments and no housing lates exist for the most recent 24 months
• If the client is unable to obtain thirdparty documentation confirming the extenuating circumstances or reestablishment of credit, the derogatory or adverse credit information cannot be offset.

For a new FHA loan:
Foreclosure:

A borrower whose previous residence or other real property was foreclosed on, sold through a short sale, or was given a deed-in-lieu of foreclosure within the previous three years is generally not eligible.

If the foreclosure was greater than three years prior to the date of the application, and the risk decision (AUS) received is an accept, the loan does not need manual downgrading (manual underwrite in the eyes of FHA means that your ratios are 31% housing /43% debt-to-income) and foreclosure documentation is not required.

Remember, FHA counts from the day the mortgage insurance claim was paid to the lender, not the trustee sale date – sometimes it can take months before the claim is paid. Have your mortgage professional check with FHA to confirm the date the claim was paid.