The FHA recently came out with new guidelines to allow borrowers who have experienced a short sale, foreclosure, or bankruptcy due to extenuating circumstances to be able to enter the housing market more quickly than before. Under the FHA Back to Work Program guidelines, if a borrower meets the following general criteria they may be able to buy a home just one year after experiencing one of these hardships.
- Must meet FHA loan requirements.
- Must document that the problem resulted from financial hardship.
- Must have re-established credit.
- Must complete HUD-approved homebuyer counseling program.
Documentation for the FHA Back to Work Program
In order to document that the problem resulted from financial hardship, you will have to substantiate that the incident was beyond your control and that it caused a reduction in your income or loss of employment. You will also need to demonstrate that household income dropped by at least 20% for a period of at least 6 months.
To determine if you have re-established credit the lender will look not only at your credit score but your recent history in making your housing payments. You should not have any late payments in the most recent 12 months related to housing and should also be able to show that you have not had any payments that are 30 days or later on non-housing expenses during that same period. You may also be required to pay any open collections or judgments.
Certificate from a HUD Approved Counseling Agency
Before you can even begin the process with a lender, however, you must obtain a certificate from a HUD-approved counseling agency that you have completed the required counseling program. This must be obtained at least 30 days before beginning the application process and is valid for 6 months.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.