The Best Home Mortgage Loans for Recovering Families

New home-buyer loans jump start families looking for more promising mortgages

If a family can prove they have had a 20 percent income reduction for a period of at least six months, they may be eligible for what some consider the best home mortgage loans available. After the housing market crash of 2008, many are finding it easy to prove.

According to foreclosure-listing company RealtyTrac, from January 2007 to December 2011, there were over 4 million completed foreclosures and 8.2 million foreclosures in process. This left a large portion of the U.S. without a home and afraid to begin with a new mortgage.

Fortunately, the Federal Housing Administration took charge last August when it released Mortgagee Letter 2013-26, which launched new home-buyer loans through the “Back to Work – Extenuating Circumstances” program.

The program revolves around families facing an economic event, which is “any occurrence beyond the borrower’s control that results in loss of employment, loss of income or a combination of both, which causes a reduction in the borrower’s household income of 20 percent or more for a period of at least six months,” Mortgagee Letter 2013-26 states.

Economic events include foreclosure, prior short sale, forbearance agreement, loan modification, deed-in-lieu and bankruptcy. If a “Back to Work” lender can verify and document a borrower’s loss of employment by evidencing a termination date or where a prior employer is no longer in business, the borrower may be eligible.

However, agencies are still looking for satisfactory credit even if the borrower is battling an economic event. The borrower’s credit history must be clear of late housing, installment debt payments, delinquency and any other derogatory credit issues. Credit scores below 500 are not allowed in the program, but borrowers with no credit score remain eligible.

If a Chapter 13 bankruptcy has not been discharged before the date on a loan application, the borrower must be granted written permission from the Bankruptcy Court to begin a new home loan.

For the first time, recovering families may apply for a new mortgage only 12 months after losing a home. The “Back to Work” program waives agencies’ traditional three-year waiting period after foreclosure, short sale and deed-in-lieu, as well as bankruptcy’s two-year waiting period.

After a few documents are settled, families are finding that the “Back to Work” program is proving itself a success. If you or a loved one is still without a place to call home, it’s not too late to find a lending agency that can help. The program ends September 30, 2016.

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