The ability to buy a home even after a
bankruptcy, foreclosure or short sale
The Federal Housing Administration (FHA) was formed in 1934. 31
years later, in 1965, it became part of the U.S. Department of Housing &
Urban Development (HUD).
The FHA's primary role is as an insurer of mortgage loans made
by FHA-approved lenders. The FHA insures loans in all 50 states, all U.S.
territories, and in the District of Columbia. Since its inception, the group
has insured more than 34 million loans which make’s the FHA the world's largest
insurer of mortgages.
FHA mortgage insurance is available for any loan which meets the
following two conditions:
- The loan must be made by an approved FHA lender THAT’s
ME
- The loan must meet the minimum standards of the
"FHA Mortgage Guidelines".
The minimum standards of the FHA mortgage guidelines are
straight-forward. Some of the more well-known rules require mortgage applicants
to show a minimum credit score of 500; to make a down payment of at least 3.5%
on a purchase; and, to verify income via W-2 or federal tax returns.
Federal Housing Administration moved to relax its
guidelines for borrowers who "experienced periods of financial difficulty
due to extenuating circumstances".
Dubbed the "Back To Work - Extenuating Circumstances
Program", the FHA removed the familiar waiting periods that typically
followed a derogatory credit event.
If you've experienced any of the following financial
difficulties, you may be program-eligible:
- Pre-foreclosure sales
- Short sales
- Deed-in-lieu
- Foreclosure
- Chapter 7 bankruptcy
- Chapter 13 bankruptcy
- Loan modification
- Forbearance agreements
The FHA realizes that, sometimes, credit events may be beyond
your control, and that credit histories don't always reflect a person's true
ability or willingness to pay on a mortgage.
Use the Q&A below to learn more about the FHA's Back to Work
- Extenuating Circumstances program. Then, get today's FHA mortgage interest
rates at no cost and with no social security number required to get started.
THE FHA BACK TO WORK -
EXTENUATING CIRCUMSTANCES PROGRAM
What is the FHA Back To Work - Extenuating
Circumstances program?
The FHA Back To Work - Extenuating Circumstances program is
the FHA's "second chance" for mortgage applicants who have
experienced financial hardship as a result of unemployment or severe reduction
in income.
Can I use the Back to Work as a first-time home
buyer?
Yes, you can use the program as a first-time buyer.
Can I use the Back To Work program as a repeat
home buyer?
Yes, you can use the program as a repeat home buyer.
Can I use the Back To Work program for an FHA
203k construction loan?
Yes, you can use the program for an FHA 203k construction
loan.
Does the FHA Back To Work program waive the
traditional 3-year waiting period after a foreclosure, short sale, or
deed-in-lieu?
Yes, the program waives the agency's three-year waiting period.
You no longer need to wait three years to apply for an FHA loan after
experiencing a foreclosure, short sale or deed-in-lieu.
Does the Back To Work program waive the
traditional 2-year waiting period after bankruptcy?
Yes, the program waives the agency's two-year waiting period.
You no longer need to wait two years to apply for an FHA loan after experiencing
a Chapter 7 or Chapter 13 bankruptcy.
Which types of "events" are covered by
the FHA Back To Work - Extenuating Circumstances program?
The program can be used by anyone who's experienced a
pre-foreclosure sale, short sale, deed-in-lieu, foreclosure, Chapter 7
bankruptcy, Chapter 13 bankruptcy, loan modification; or who has entered into a
forbearance agreement.
How do I apply for the program?
What are mortgage rates for the FHA Back To Work
program?
Mortgage
rates are the same as mortgage rates for any other
FHA loan. There is no premium on your interest rate, nor are there additional
fees to pay at closing. Your FHA mortgage rate will be unaffected by
the FHA Back To Work program.
My current lender says that it's not
participating in the program? What do I do?
Call me TODAY
630-338-1160
What are the minimum eligibility requirements of
the FHA Back To Work program?
In order to qualify, you must meet several minimum eligibility
standards. The first is that you must have experienced an "economic
event" (e.g.; pre-foreclosure sale, short sale, deed-in-lieu,
foreclosure, Chapter 7 bankruptcy, Chapter 13 bankruptcy, loan modification,
forbearance agreement). The second is that you must demonstrate a full recovery
from the event. And, third, you must agree to complete housing counseling prior
to closing. You must also show that your household income declined by 20%
or more for a period of at least 6 months, which coincided with the above
"economic event".
How do I document a 20% loss of household income
for the FHA?
In order to document a 20% loss of household income, you must
present federal tax returns or W-2s, or a written Verification of Employment
evidencing prior income. For loss of income based on seasonal or part-time
employment, two years of seasonal or part-time employment in the same field
must be verified and documented as well. Income after the onset of the
economic event, which should represent a loss of at least 20% for at least six
months, should be verified according to standard FHA guidelines. This may
include W-2s, pay stubs, unemployment income receipts, or other. Your lender
will help you determine the best method of verification.
How do I document a "satisfactory"
credit history since my "economic event" for the FHA?
We will review your credit report as part of the FHA Back
To Work approval process. All accounts will be reviewed -- ones which went
delinquent and ones which remained current. Your lender will attempt to
determine three things -- that you showed good credit history prior to the
economic event; that your derogatory credit occurred after the onset of the
economic event; and, that you have re-established a 12-month history of perfect
payment history on major accounts. Minor delinquencies are allowed on revolving
accounts.
Does the "20 percent loss of income"
eligibility condition apply to me only, or to everyone in the household?
The "20 percent loss of income" eligibility condition
applies to everyone in the household. If one member of the household lost
income as the result of a job less but the household income did not fall by 20
percent or more for a period of at least months, the borrower will not be FHA Back
To Work Extenuating
Circumstances-eligible.
Is the FHA Back To Work Program limited by loan
size?
No, the program is not limited by loan size. The FHA will always
insure up to your area's local FHA loan limit.
With the FHA Back To Work Program, how soon
until I can buy a home after foreclosure?
Via the program, you can buy a home 12 months after a
foreclosure.
With the FHA Back To Work Program,
how soon until I can buy a home after a short sale?
Via the program, you can buy a home 12 months after a short
sale.
With the FHA Back To Work Program,
how soon until I can buy a home after a deed-in-lieu of foreclosure?
Via the program, you can buy a home 12 months after a
deed-in-lieu of foreclosure.
With the FHA Back To Work Program,
how soon until I can buy a home after Chapter 7 bankruptcy?
Via the program, you can buy a home 12 months after filing for
Chapter 13 bankruptcy.
With the FHA Back To Work Program,
how soon until I can buy a home after Chapter 13 bankruptcy?
Via the program, you can buy a home 12 months after filing for
Chapter 13 bankruptcy.
Is there a counseling requirement in order to
use the FHA Back To Work program?
Yes, in order to the use the program, you must agree to attend
housing counseling.
Will my housing counselor help me shop for FHA
mortgage rates?
No, your housing counselor will not help you shop for FHA
mortgage rates. However, many counselors can help you read a Good Faith
Estimate which may help you make better lending decisions.
Why do I need to take housing counseling?
The housing counseling required by the FHA Back To Work
program will address the cause of your economic event, and help you consider
actions which may prevent reoccurrence.
How long is the housing counseling session I am
required to take?
The housing counseling required will typically last one hour.
Do I have to take housing counseling in-person?
No, you do not have to take the housing counseling in-person.
Housing counseling may also be conducted by phone or via the internet.
If I complete counseling, am I automatically
approved for the FHA loan?
No, you are not automatically approved for the FHA loan if you
complete the housing counseling required. You must still qualify for the FHA
mortgage based on Federal Housing Administration mortgage guidelines.
What is the minimum credit score requirement for
the FHA Back To Work program?
There is no minimum credit score requirement for the FHA
Back To Work program, necessarily. The program follows standard FHA mortgage
guidelines. Credit scores below 500 are not allowed, but borrowers with no
credit score whatsoever remain eligible. The Federal Housing
Administration doesn't change mortgage rates based on credit score. Click here to get today's FHA mortgage
rates.
Are modified mortgages eligible for FHA Back To
Work?
Yes, modified mortgages are eligible.
Are loans on a payment plan eligible for FHA
Back To Work?
Yes, loans on a payment plan are eligible.
I lost my job because my employer went out of
business? Does this qualify for the program?
Yes, job loss resulting from an employer going out of business
is Back-to-Work eligible. Your lender will ask you to provide a written
termination notice or publicly-available documentation of the business closure.
Can I use Unemployment Income receipts to
document that I was out of work?
Yes, you can use Unemployment Income receipt to document that
you were out of work.
I am still in Chapter 13 bankruptcy. Do I need
the court's permission to enter into the mortgage?
Yes, if your Chapter 13 bankruptcy has not been discharged prior
to the date of your loan application, you must have written permission from
Bankruptcy Court to enter into the purchase transaction.
When does the FHA Back To Work - Extenuating
Circumstances program end?
The FHA Back To Work - Extenuating Circumstances program
ends September 30, 2016.
