Mortgage lenders for bad credit are helping refinance families in need

The human experience begins with a home — a central safety where families live and grow. Forbearance agreements, foreclosure, loan modification, bankruptcy and prior short sale have steered families from enjoying where they place their greatest pride. For the past five years, families, maybe like yours, have faced constant worry that banks won’t understand their monetary situation after the housing market crash in 2008.

Fortunately, this past August, the Federal Housing Administration (FHA) launched a program that allows families to apply for a new home loan only one year after an economic event. For many families, this shorter waiting period is a home-mortgage miracle. Finally, mortgage lenders for bad credit are making moves.

The Back to Work program is designed for borrowers with extenuating circumstances — those who are saying, “I had a short sale” and, “I had a foreclosure,” among other economic crises. However, eligibility depends upon if the family is making a full recovery. In other words, bad-credit home financing begins with creating good credit. Most lenders recommend that a borrower’s monthly mortgage payment should not exceed 28 percent of the borrower’s gross income.

The FHA defines satisfactory credit as a 12-month history clear of late housing and installment debt payments. Also, satisfactory credit must appear after a reduction in household income of 20 percent or more for at least six months. This shows mortgage lenders for bad credit that the family is fully recovering.

Many lenders steer recovering families away, but those participating in the program aim to help. The FHA requires “Back to Work” borrowers to participate in at least one hour of one-on-one housing counseling, where families can continue to receive financial advice to ensure full recovery.

“Housing counseling enables borrowers to better understand their loan obligations, and assists borrowers in the creation and assessment of their household budget,” according to Mortgagee Letter 2013-26.

Designed for families in search of a more simple loan process, borrowers in the “Back to Work” program do not face premiums nor additional fees at closing — and they shouldn’t. In a space where children play and families gather to celebrate, the “Back to Work” program will make any home a place to forget about past financial difficulties.

FHA Created Easy Home Mortgage Loans With Back To Work Program

After a financial crisis, the last thing a borrower wants to think about is applying for another mortgage loan. The situation can be frightening, wondering if life will take another unexpected, financial twist. This past August, the Federal Housing Administration (FHA) created a program that may help lessen the worries of those with previous economic events.

The “Back to Work – Extenuating Circumstances” program gives families a second chance at a successful mortgage without long waiting periods. Whether a borrower is recovering from bankruptcy, prior short sale, prior foreclosure, forbearance agreement or loan modification, the program’s easy home mortgage loans may be able to help.

If a borrower has suffered what Mortgagee Letter 2013-26 calls an “economic event,” he or she is eligible to apply: “An economic event is any occurrence beyond the borrower’s control that results in loss of employment, loss of income, or a combination of both.” The household income must have been reduced by 20 percent or more for at least six months.

Another requirement by Mortgagee Letter 2013-26 is satisfactory credit. The letter states, “The lender may deem a borrower to have satisfactory credit if the borrower’s credit history is clear of late housing or installment debt payments.” In other words, the borrower must have supplied sufficient housing payments on time for at least twelve months.

This also means that a household must be making a full recovery from their job loss, foreclosure or other economic event. Many banks refuse to work with borrowers who have had financial crises in fear that in will happen again. However, many are beginning to lend home mortgage loans through the Back to Work program, since borrowers must prove they’re fully recovering.

Another reason why lenders are hopping on board with the FHA is because the program requires borrowers to have one hour of one-on-one housing counseling in order to participate – another way families can prove they will know how to boost their credit. Although recovering from significant credit reduction can be a long process, the “Back to Work” program is making home mortgage loans more quick and easy for those working to get back on track.