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.

Raise Your Credit For The Back to Work Mortgage Loan

A “Back to Work” home mortgage requires satisfactory credit; are you eligible?

The “Back to Work” mortgage loan has been in full swing since August of last year. Millions of Americans are now eligible to apply for a new home mortgage loan if they have faced an extenuating circumstance as a result of the housing market crash of 2008.

A “Back to Work” home mortgage requires satisfactory credit, which takes a significant hit after an economic event. Credit scores below 500 are not allowed in the program, but borrowers with no credit score remain eligible. Having satisfactory credit proves you are good risk to lending agencies, meaning you have a higher probability of repaying your mortgage on time — exactly what agencies are looking for. Use the following tips to guide your credit score in “Back to Work’s” direction.

Make payments on time
Although it sounds simple, the most defining factor in your credit score is whether your payments are made on time or not. The Back to Work program requires a 12-month credit history that is clear of late housing, installment debt payments, delinquency and other derogatory credit issues. Set up payment reminders with your online banking system. The reminder will send you a text message or e-mail notifying when your payment is due.

Don’t pollute your credit report
Instead of using a bunch of different cards for small amounts, have a go-to credit card. If you have multiple credit cards with small balances, pay them off. Your score will consider how many different cards have balances. However, don’t panic and cancel all of your cards — that can hurt your score, too.

Keep good debt
Many borrowers believe that old debt appearing on their credit report diminishes their score; this is actually false. If you have debt that you handled well and paid back on time, keep it on your credit report. The longer the history of good debt, the better your credit score is. This proves to lenders that you are a good risk that will be able to make payments on time. Negative debts will disappear from your credit report after seven years, but adding a history of good debt is not harmful.

Don’t obsess over the number
Making quick significant changes in your credit usage usually indicates risky behavior. Lending agencies want to know that you will be able to repay your Back to Work mortgage in stable increments. If you are denied credit, the lender is required by law to show you the credit report it used to make its decision (Dodd-Frank Wall Street Reform and Consumer Protection Act). Be responsible for your bills and don’t obsess over your credit score. If you make smart financial decisions, the number will revive itself. If you remain concerned, speak with a credit expert on how to handle your specific credit history.

The Back to Work Lending Program Supports New Homebuyers

The two most beneficial tips for recovered home-buyers back in the market

The Back to Work loan program has made it possible to apply for a new mortgage only 12 months after an economic event. After a situation like bankruptcy or foreclosure, it can be frightening to begin the move from an apartment or another shelter, to a house that you can call your own. Here are two often-forgotten ideas that will make your transition smoother.

1. What is your budget?

This may seem like a silly question, but many families don’t know what they can afford. It is easy to overestimate what is affordable when each living cost is yet to be pieced together.

Earnest money is the deposit made on a home after a family submits an offer. This proves to the seller that you are serious about buying the house. A down payment is an initial and partial payment made at the time of settlement. The Back to Work lending program allows borrowers to put down only 3.5 percent on a new mortgage.

As soon as you move in, there will be other factors to consider as well, like heating and cooling, water and electricity. Don’t forget other living expenses, such as food, internet, cable, car insurance, fuel and cell phones.

To avoid making the same mistakes twice, families should have a back-up plan for handling the loss of employment or income. If the main provider lost his or her job, would the family be able to continue paying the mortgage? Does the family have a sufficient savings plan?

Calculating these numbers can become complicated and stressful, which is why most families avoid budgets. However, it becomes much easier when families keep track in an Excel file or other documenting program. “Back to Work” lending program participants are required to complete at least one hour of housing counseling, in which the counselor can help create or assess a household budget.

2. Create a “wants” and “needs” list.

Although a fireplace, a finished basement or backyard pool sound great. Extra wish-list items only make homes more costly, especially when there are other financial factors to consider. Your family’s needs should be your first priority.

Location is key. Consider how close your desired location is to your job, your children’s school and the supermarket. Look into whether public transportation is an option and if the garage will fit your family’s vehicle. Some neighborhoods have strict rules about parking on the street, fencing and sheds.

Townhouses, condominiums and duplexes will each have different ways of landscaping and disposing of garbage. Creating a list of what will be truly beneficial to your family will narrow your choices down to the perfect home that will make the “Back to Work” loan program a successful one.