Borrowers love the benefits of working with “Back to Work” program lenders
Foreclosure, prior short sale, bankruptcy and deed-in-lieu can leave families financially struggling for years. Previously, the Federal Housing Administration (FHA) required that online home mortgage lenders support two to three year waiting periods for families battling an unfortunate economic event.
Mortgagee Letter 2013-26, released on August 15 of last year, states, “FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”
The FHA launched its “Back to Work – Extenuating Circumstances” program, which allows recovering families to apply for a new mortgage only 12 months after losing a home until September 30, 2016.
Economic events result in loss of employment or income which causes a total household income to drop by 20 percent or more for at least six months. In turn, this causes families to lose their homes and possessions.
The program allows borrowers to put down only 3.5 percent on a mortgage with no premiums and no additional fees at closing. Mortgage rates in the program are the same as mortgage rates outside of the program.
Prospective “Back to Work” borrowers that have yet to be discharged from Chapter 13 bankruptcy must obtain written permission from the Bankruptcy Court before program eligibility.
All prospective borrowers must complete a minimum of one hour of one-on-one housing counseling by a Housing and Urban Development approved agency, which can be found at http://www.hud.gov.
“Housing counseling is an important resource for both first-time home buyers and repeat home owners,” FHA’s letter states.
The session must address the cause of the borrower’s economic event and be completed between 30 days and six months, prior to submitting a new home loan application.
Mortgagee Letter 2013-26 states, “Housing counseling enables borrowers to better understand their loan options and obligations, and assists borrowers in the creation and assessment of their household budget, accessing reliable information and resources, avoiding scams, and being better prepared for future financial shocks, among other benefits to the borrower.”
Although the FHA has recognized that bad credit does not imply a prospective borrower’s ability to repay a mortgage, it is still determined to find families who are fully recovering with satisfactory credit. “Back to Work” program lenders verify that each borrower’s credit history is free of delinquency, late housing, installment debt payments and other derogatory credit issues.
Borrowers with credit scores below 500 are not allowed to apply, but borrowers with no credit score remain eligible.
Losing a home can be a rough and frightening experience, but it’s not too late to apply through Back to Work program lenders. If your current lender is not participating, there are online home mortgage lenders willing to work with every situation.