Extenuating Circumstances « FHA Home Loan Blog

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EXTENUATING CIRCUMSTANCES

JUNE, 2009

If you are seeking an approval on an FHA Mortgage and have had a bankruptcy within the past 2 years or a foreclosure within the past 3 years, you may have heard the term "extenuating circumstance." What does this mean?

Normal FHA Guidelines require that 24 months pass after a bankruptcy discharge before you can get approved for an FHA Mortgage. The rule is 36 months for a foreclosure.

However, if you can document that you had extenuating circumstances that led to the bankruptcy or foreclosure, and you have done an excellent job of managing your finances since the event, you have a chance at an approval before that time frame has elapsed.

An extenuating circumstance is an event that was out of your control that made a significant impact on your finances and led to the bankruptcy or foreclosure. Two prime examples are a medical problem such as a major accident or illness or loss of insurance, or the loss of employment in your household. You must have some sort of documentation to support your claim and will be required to write a letter to the lender explaining the events that led to the financial crisis.

One event that is not an acceptable exenuating circumstance is divorce. Unfortunately, lenders will not grant an exception if you suffered a divorce that led to financial crisis. You will have to be patient and wait until the 24 or 36 months has passed.

Hopefully, this article has helped you understand the concept of extenuating circumstances. If you have further questions, please feel free to contact us at service@fhahomeloanhelp.org.

June 06, 2009 6:26

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