FHA offers Back to Work Loans for Mortgage Seekers

Anyone who has been through a financial crisis can understand how difficult the situation can get. After a period of financial hardship, it can be very challenging to start anew. For millions who lost their homes to a short sale, bankruptcy or similar hardships, seeking a new home loan meant that they had to wait for up to 3 years before they could apply for one. FHA launched the Back to Work lending program on August 15, 2013, with a view to help families still going through an unfortunate economic event. With this lending program, borrowers could apply for a home loan again just after a year of an economic event.

The Federal Housing Administration(FHA) defines an economic event as “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.” The household income includes the overall income of a household, not just one member.

Economic hardships such as a prior short sale, deed-in-lieu, forbearance agreement and loan modification are often beyond a borrower’s control. If a family can provide documented proof of an economic event and also prove that their credit score has been showing an upward trend for at least one year, Back to Work mortgage lenders can consider the family for this lending program.

Reentering the market is an important decision for families after they have been through financial hardship. However, before they apply for a second chance at home ownership, the FHA requires that the borrowers must undergo a 1-hour housing counseling session with an agency approved by them. This session could be completed in person, over the phone or online. The session takes a look at the economic event the family has been through and how a similar situation may be avoided in the future.

Housing counseling helps borrowers understand their financial situation better. It makes them better aware of options available to them. Once they are a part of this program, the borrower puts down just 3.5% on their new mortgage, with no premiums and fees at closing.

With a negative financial situation, times can be tough. However, with back to work mortgage lenders, borrowers can once again tread on the path of home ownership. The program ends in September of 2016. While there’s still time, borrowers must look for lenders offering this bracket of FHA loans.

If you, or someone you know has been through an adverse economic event, but are committed to getting past the financial hurdles; it is a wise decision to apply for an affordable home loan thorough the back to work program. Why wait further, if you are eligible now?

Who Are Looking For Back to Work Mortgage Lenders

Gain these traits to participate in the “Back to Work” home loan program

If you are hoping for a second chance in the housing market after an economic event like foreclosure, short sale or bankruptcy, it’s not too late to apply for a new loan that could change your financial life. The FHA’s Back to Work home loan allows borrowers to put only 3.5 percent down with no premiums or fees at closing. The program, which is designed for families who have previously had financial hardships, runs through September of 2016. If you’re looking to get back on your financial feet with a new mortgage, you must first prove you have what it takes. Here are exactly the types of borrowers that Back to Work mortgage lenders are looking for.

Borrowers who have taken housing counseling
The FHA requires that all “Back to Work” participants attend at least one hour of housing counseling with an agency approved by the U.S. Department of Housing and Urban Development. Housing counselors help in the creation and assessment of a household budget. This helps eliminate unnecessary spending, ensuring you will have plenty of financial support for your new mortgage. Counselors also teach how to avoid scams and how to become better prepared for future financial shocks.

Borrowers who have satisfactory credit
Having a good credit score shows that you are a responsible candidate who will repay a mortgage back on time — a “good risk.” Since lenders have to trust that you will maintain a steady job and continuously show financial stability through a nearly lifelong commitment, they want to see that you can prove your creditworthiness. To be eligible in the program, borrowers must have a 12-month credit history that is clear of late housing, installment debt payments, delinquency and any other derogatory credit issues. Borrowers with credit scores below 500 are not accepted, but borrowers with no credit score whatsoever remain eligible.

Borrowers who have the proper documents
Before visiting a lending agency that offers the program, take time to gather the necessary documents you will need to prove you have fully recovered from your previous economic event. Bring bank statements from the past two or three months, including all checking and savings accounts, as well as any 401k or stock accounts. If you receive any additional income, such as child support, Social Security, alimony or a pension award, bring paperwork that provides proof. Make clear copies of both your driver’s license and your social security card. Most “Back to Work” lenders will also want to see tax returns and at least 30 days worth of pay stubs. Anyone who is signing the loan, including all cosigners, must be able to provide proper paperwork to be eligible. Some agencies list on their websites which documents you will need to begin a new mortgage.