FHA’s Policy On Short Sales
FHA just came out with their new mortgagee letter on short sales and short payoffs. To read it in its entirety go to http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf
To summarize it, if you paid your mortgage on time and were not taking advantage of the declining market and are not purchasing a similar or superior property within a reasonable distance you can get an FHA mortgage.
If you did a short sale and did not pay your mortgage you have to wait 3 years unless the can show that the default was due to circumstances beyond your control and the review of the credit report indicates prior satisfactory credit.