On August 15, 2013, The U.S. Department of Housing and Urban Development announced a new program designed to assist homebuyers who have been faced with difficulty in getting a home mortgage. The FHA BACK TO WORK PROGRAM provides relief to borrowers who have experienced a reduction in income that in turn resulted in a Foreclosure or Bankruptcy. Typically, if one of these events occurs in a borrowers credit profile, they must wait 2-3 years to be eligible for any type of mortgage financing. With the Back To Work Program, the borrower will only need to wait for 12 months from the Foreclosure or Bankruptcy. In cases where both a Foreclosure AND a bankruptcy occurs, the 12 month wait starts based on the LATEST event.
There are of course specific documentation and eligibility requirements. In brief they are as follows:
- The credit impairment must have been the result of Loss of Employment or significant loss of Household Income BEYOND the borrowers control.
- The borrower must demonstrate full recovery from the event
- The borrower must complete housing counseling (this counseling must occur 30 days prior to application and be with a HUD approved agency)
- The economic event must result in a 20% or greater decrease in income. (divorce is not a qualifying occurrence)
- The loss is based on the household members living in the home AT THE TIME of the occurrence, even if they are no longer in the household. (However, that household member must have been a co-borrower on the previous mortgage in the event of foreclosure. )
- Recovery is established by demonstrating 12 months of satisfactory credit. This means that if you have had 12 months of current or previous mortgage or rental history with NO 30 day late occurrences , no more than 1 thirty day occurrence on non-housing debt and NO new collections reporting (other than medical or documented identity theft.)
- Additionally, there should be a pattern of acceptable credit PRIOR to the economic event that caused the income loss.
It is important that all of the facts surrounding the event be heavily documented. Lenders will be required to obtain verifications of employment or other public information to support the loss of income and will also rely on tax returns and unemployment records to support the income loss. There will also be great care given to documentation that the loss of income was not voluntary or the result of some other non-qualifying life event.
This is a great opportunity for credit worthy borrowers to re-enter the housing market earlier and help in the overall housing recovery while rates are still low and prices are still moderate. If you would like more information on how you can qualify for this program or just have general questions, please call our office at 800-736-8486 or emai us for additional information!