For many people who have had to short sell their home for whatever reason, one of the most common questions is “how long before I can get a mortgage again?”

HUD has recently announced with an official Mortgagee Letter (09-52) that depending on whether or not you were current at the time of the short sale will make a difference as to how long you must wait to get a new FHA insured loan.

If you are not current at the time of the short sale of your home:

Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Lenders may make exceptions to this rule under certain circumstances.

If you are current at the time of the short sale of your home:

Although it is not clear in the letter (surprise, surprise), it is common that lenders will not allow you to get an FHA loan for 2 years from the time of short sale of your home.

But –

According to the Mortgagee Letter, it unclearly states that you are eligible for another FHA loan if you were current on your payments at the time of sale and “you didn’t short sale your house to take advantage of market conditions and purchase at a reduced price a similar or superior property within a reasonable commuting distance…”

Confusing if you ask me.

But here is the official wording of it:

FHA guidance on short sales
Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to:

► Take advantage of declining market conditions, and
► Purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.

For detailed information on converting existing principal residences into rental properties, see 4155.1 4.E.4.g.

Guidance on borrowers current at the time of short sale
Borrowers are considered eligible for a new FHA-insured mortgage if:

► They were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and

►The proceeds from the short sale serve as payment in full.

For detailed information, see “Short Sales” at 4155.1 4.C.2.l.

And if you have tried unsuccessfully to short sell your home and haven’t been able to get a loan modification, be sure you are aware of how long the waiting period is to get an FHA loan after a foreclosure.

And as always, if you have additional questions you can always call 1-800-CALL-FHA to speak with a representative at FHA directly.

According to USA Today, there were about 1.7 million homeowners who were far along in the foreclosure process in the fall – which means that there is a large bulge of homes that are going through the foreclosure process and will be available for sale from the banks in the spring and into 2010.

A year ago, there were 1.1 million – which means that that the number has risen substantially and many experts predict the number will rise through at least the middle of 2010.

According to Mark Fleming – the Chief Economist at First American / CoreLogic the foreclosure backlog is equal to about half half of the 3.8 million unsold new and existing homes currently on the market.

“We’re going to be dealing with high levels of distressed (sales) in the marketplace for at least a couple of years,” Fleming said. “It’s not just all going to disappear.”

The estimate from First American is fairly conservative – other reports estimate a higher number – but they have chosen to make some fairly conservative assumptions in their algorithms.

Regardless of exactly how big the number is exactly of the “shadow inventory” one thing is clear – there are still many more homes that are in the foreclosure process and with loan modifications not being as successful as many people hoped – homeowners are left with a difficult choice: go through the short sale process or the foreclosure process.

And in 2010 it is pretty clear that a large portion will end up in foreclosure which will only add to the shadow inventory of homes across the nation.

For those homeowners who are in distress and are unable to short sell their home or get a loan modification, the most common end result is foreclosure.  As the foreclosure crisis continues on and many homeowners have either went through the foreclosure process or are facing foreclosure, one of the common questions that they ask is:

How long before I can get a mortgage loan again after foreclosure?

According to FHA guidelines (4155.1 4.C.2.f: Previous Mortgage Foreclosure):

A borrower is generally not eligible for a new FHA-insured mortgage when, during the previous three years

1. his/her previous principal residence or other real property was foreclosed, or
2. he/she has given a deed-in-lieu of foreclosure.

Exception:

The lender may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure. Divorce is not considered an extenuating circumstance.

However, the situation in which a borrower whose loan was current at the time of a divorce in which the ex-spouse received the property and the loan was later foreclosed qualifies as an exception.

Note: The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.

Remember, when getting an FHA loan after foreclosure – just because you wait 3 years doesn’t mean you will qualify – all of the other criteria for a FHA loan still apply (credit score, income, assets, etc.)