The purpose of this post is to explain the “FHA Back To Work Program.” If you’ve experienced any of the following financial difficulties you may be program-eligible:
- Pre-foreclosure sales
- Short sales
- 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 rates to begin seeing whether you’re eligible.
The FHA Back To Work Program – Extenuating Circumstances Program
What is the FHA Back To Work Program- Extenuating Circumstances program?
- The FHA Back To Work Program – 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 inincome.
Can I use the FHA Back To Work Program as a first-time home buyer?
- Yes, you can use the program as a first-time buyer.
Can I use the FHA Back To Work Program as a repeat home buyer?
- Yes, you can use the program as a repeat home buyer.
Can I use the FHA 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 FHA 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 Program- 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.
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 is he isdetermine the best method of verification.
How do I document a “satisfactory” credit history since my “economic event” for the FHA?
- Your lender will review your credit report as part of the FHA Back To Work Program 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 Extenuating Circumstances-eligible.
With the FHA Back To Work Program, how soon until I can buy a home after foreclosure, short sale, bankruptcy?
- Via the program, you can buy a home 12 months.
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.
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.
When does the FHA Back To Work Program – Extenuating Circumstances program end?
- The FHA Back To Work Program – Extenuating Circumstances program ends September 30, 2016.
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