Back to Work Program Lenders Are Approving Loans Now

FHA’s home mortgage loans are ready to be approved through a method that’s easier than ever

The home mortgage process has never been more simple. With Back to Work home mortgage loans, families that have been battling extenuating circumstances may now apply for a new mortgage only 12 months after losing a home.

The housing market crash of 2008 put millions of Americans across the country under the weather. Five years later in August of 2013, the FHA gave these families a second chance.

Mortgagee Letter 2013-26 states, “The FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances.”

If you have faced foreclosure, short sale, deed-in-lieu, Chapter 7 bankruptcy, Chapter 13 bankruptcy, forbearance agreement or loan modification, the time to apply is now. The program runs through Sept. of 2016.

The letter states, “As a result of the recent recession, many borrowers who experienced unemployment or other severe reductions in income were unable to make their monthly mortgage payments, and ultimately lost their homes.”

Back to Work program lenders are accepting individuals who can prove a loss of employment or income of 20 percent or more for a period of at least six months. If you can provide a W-2 form, a pay stub, an unemployment income receipt or another form of unemployment verification, you may be eligible.

Although you might still be recovering from an economic event, the FHA also requires borrowers to prove satisfactory credit. Borrowers with credit scores below 500 are not accepted into the program, but borrowers with no credit score remain eligible.

A satisfactory credit score proves to lenders that you will be able to repay a mortgage in a timely fashion. If the borrower can show a 12-month credit history that is clear of late housing, installment debt payments, delinquency and other derogatory credit issues, he or she should remain eligible.

Another way the FHA is giving lending agencies peace of mind is through housing counseling. “Back to Work” borrowers are required to participate in at least one hour of one-on-one housing counseling, which is now easier than ever. Families can find participating agencies online at www.hud.gov, and counseling may be completed online, by phone or in person. The agency must be approved by the U.S. Department of Housing and Urban Development.

Counselors ensure that families won’t make the same financial mistakes twice. They teach how to create and assess a household budget, how to avoid scams and how to better prepare for future financial shocks.

The letter states, “Housing counseling is an important resource for both first-time home buyers and repeat home owners.”

If you have faced an economic event, talk to a lending agency that offers the “Back to Work” home loan. These agencies will listen to your situation and keep your best interest throughout the duration of your next mortgage.

Clarifying New Back to Work Lending

An explanation of the “Back to Work” loan’s confusing terms

On August 15th of last year, the Federal Housing Administration relaxed its guidelines for borrowers who have “experienced periods of financial difficulty due to extenuating circumstances,” according to Mortgagee Letter 2013-26.

The terminology throughout the mortgagee letter isn’t written for regular folks. Many of the terms used to describe the Back to Work - Extenuating Circumstances program could cause interested families to shy away. However, the program isn’t as complicated as it may seem.

The FHA is considering those who can document an economic event, which the administration defines as “any occurrence beyond the borrowers 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.”

In other words, an economic event can be foreclosure, short sale, deed-in-lieu, loan modification, forbearance agreement, Chapter 7 bankruptcy or Chapter 13 bankruptcy. If you can provide documents that show when and where employment was lost, you should be eligible.

Throughout the letter, the term “borrower” includes both the main borrower as well as the co-borrower. Anyone who signs a mortgage is considered a borrower. A “household member” is a person who lived at the borrower’s residence during the economic event and was a co-borrower on the previous mortgage.

The “onset of an economic event” is the date in which the event occurred. This date also starts a family’s waiting period, the length of which is decided by the FHA lending agency. New “Back to Work” lending allows families to apply for a new mortgage only twelve months after losing a home. Normally, the waiting period after foreclosure and short sale is three years, and two years after bankruptcy.

Recovering from a significant reduction in credit from an economic event can take up to seven years. Through “Back to Work,” recovering families have a second chance to refinance. However, credit scores below 500 are not eligible for the program.

To be eligible for a Back to Work loan program, you must have a 12-month credit history that is clear of late housing, installment debt payments, delinquency and other derogatory credit issues. The letter defines this as “satisfactory credit,” meaning you are a good risk to lenders if the guidelines are met.

Borrowers are also required to attend “housing counseling,” which is a one-hour session with a U.S. Department of Housing and Urban Development approved agency. Counselors help borrowers create a household budget and teach them how to avoid making the same financial mistakes twice. The cause of the economic event must be addressed during counseling.

Recovering from an economic event is a long-term process, but the “Back to Work” program is available to help the millions of Americans who are facing financial hardship. Don’t let the mortgagee letter’s confusing terminology turn you away. Speak with a mortgage and lending expert in person or online for more information.

Looking for a Back to Work Mortgage Loan? Read This First

If you are shopping for a back to work mortgage loan, you will need to show your lender that you are in economic recovery. Having been through an economic event such as foreclosure, deed-in-lieu, short sale or bankruptcy, there is certain proof that you will need to provide in order to qualify for a loan. This should not cause you any alarm, however. Just read on and find out what the requirements are.

To begin with you will need to prove that the credit impairments attached to your Social Security Number were because of an economic event that was beyond your control. In addition, you will need to prove that your household income was severely affected. The event could be that you lost your job or other source of income. You will also need to show that you have recovered fully financially from the adverse economic event. Finally you will need to go through HUD housing counseling so as to qualify to move into the next step of the process.


FHA back to work program by 1stalliancelendingllc

In order to prove that you are in full economic recovery you will need to show that your credit history is on the up and up. That means that you are well able to pay your housing costs on time and that you are not making your payments in installments. If you have revolving accounts you will also need to show that you are paying those on time. With 12 months of satisfactory payments, you will have passed one stage of the qualification process for the back to work mortgage loan. If you have a loan modification it is important to show that you are making your payments in a timely fashion and in full.

The other requirement that must be met is one that qualifies your situation to be termed as an economic event. That means that you will need to show that the reduction of household income was 20% or more than that. This loss must have been experienced for at least 6 months in order for you to qualify for a back to work home mortgage. In order for these requirements to be met it is important that you provide the necessary documentation for purposes of underwriting as well as loan approval.

The documents you will be required to produce will include confirmation that your income was reduced by at least 20% for at least six months. You will also need to show proof of loss of income or employment. Proof of this will be in your W2s as well as your tax returns. You may also be required to produce documents showing that you closed your business or an employment termination letter. Be sure to have all your documentation in place so that you can present them as needed for the success of your loan application.