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.