Sunday, May 25, 2014

Back to Work Program Lenders Redefine Mortgage Guidelines

Home mortgage loans are less complex through the FHA’s new program

Families who have struggled with financial hardships now have a more efficient option that allows first-time homebuyers and repeat homeowners to quickly apply for second-chance home mortgage loans.

The “Back to Work” program helps families who have faced an economic event like foreclosure, short sale, deed-in-lieu, bankruptcy, loan modification or forbearance agreement. These families are now able to apply for a new mortgage only 12 months after losing a home. Previously, the waiting period after such events was oftentimes greater than three years.



For millions of families who are still battling with the U.S. housing crash of 2008, the program is nearly a miracle. If the down payment you are able to make is less than 20 percent, a Federal Housing Administration (FHA) loan is right for you. Through “Back to Work,” borrowers may put down only 3.5 percent with no premiums or fees at closing.

Prospective borrowers may be eligible to apply if they are working again, possess a steady income and can prove previous extenuating circumstances through proper documentation. Participating borrowers must be able to meet general guidelines that involves employment, income and credit.

Lenders ensure borrowers have re-established a steady financial life through credit history reports. To be eligible, borrowers must have a 12-month credit history that is clear of late housing, installment debt payments, delinquency and other derogatory credit issues. Prospective participants with credit scores below 500 are not accepted, but those with no credit history whatsoever remain eligible.

If a prospective homeowner has open collections or any judgment accounts, a “capacity analysis” will be completed to determine if the borrower will be able to afford repaying other creditors and a new mortgage simultaneously.

Although an economic event will stay on a borrower’s credit history report for up to seven years, it’s never too late to start recovering. In fact, the FHA requires that all “Back to Work” participants complete at least one hour of one-on-one housing counseling to ensure they have a better understanding of how to become and stay fully recovered.

Counselors teach borrowers how to create and assess a household budget. They also help borrowers avoid scams and become better prepared for future financial shocks. Oftentimes, borrowers just need a small push to regain financial confidence, avoid poor spending habits and a routine of paying bills on time.

To begin the path back to homeownership, interested borrowers may connect with any lender that offers the “Back to Work” program. Borrowers should find a lender that has experience dealing with many other cases of extenuating circumstances. The loan is offered through Sept. of 2016 and can be found in all 50 states. “Back to Work” program lenders will evaluate previous hardships and affordability to ensure the program is right for each family’s situation.

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