Back to Work Mortgage Lenders Look for Ready Borrowers

Three steps to take before talking to home mortgage lenders

As of August of last year; the Federal Housing Administration (FHA) has offered a new mortgage option for families who have faced extenuating circumstances. Back to Work mortgage lenders allow families who have faced foreclosure, bankruptcy, short sale and other significant economic events to apply for a new loan only 12 months after losing a home. During that waiting period, there is much that can be done to better prepare families for a new mortgage.

1. Raise your credit score
Although it’s easier said than done, raising your credit score could make a significant difference in whether a lender will consider you a “good risk.” For lending agencies, the more creditworthy you are, the more likely you will be able to make payments on time. The Back to Work home loan does not allow credit scores below 500. To ensure you will be accepted, setup payment reminders in your online banking system. A text message or e-mail will remind you when upcoming bills are due. You could also consider setting up automatic payments, which will debit payments straight out of your account on the date you wish. Paying bills on time is the most contributing factor in boosting your credit score. Decreasing how much debt you owe is another important factor. Create a payment plan in which you pay off your highest-interest cards first, while continuing to maintain minimum balances on your other accounts.

2. Attend housing counseling
The Federal Housing Administration requires borrowers to participate in at least one hour of housing counseling. This must be completed a minimum of 30 days but no more than six months prior to submitting a new mortgage application. Although borrowers typically frown upon counselors, it can be an enlightening and empowering experience to learn how to take control of your financial life. Counselors teach borrowers how to become better prepared for future financial shocks and how to avoid scams, among many other insightful topics. The FHA requires counselors to address the cause of a family’s economic event. The agency must be approved by the U.S. Department of Housing and Urban Development. A list of participating agencies can be found at www.hud.gov.

3. Assess your budget
Determining how much money you can spend each month on mortgage payments is an important step before a family begins home shopping. Begin by making a budget, listing different household categories and how much they cost each month. Items like food, car insurance, gas, Internet, cell phones and childcare should all be included. Small purchases, like birthday gifts and movie tickets, can add up quickly if you are not budgeting how much is being spent. Each time you make a purchase, add it into a written spreadsheet or excel file to keep track. Subtract all of your monthly expenses from your monthly income to determine what kind of a mortgage you can afford. Don’t forget to leave money for savings, too.

Finding the Best Home Mortgage Loans after a Short Sale

If you have previously gone through a short sale you are not closed off from obtaining a new home loan. You just have to make sure that you meet the necessary requirements that have been set up by the FHA. This is regardless of whether or not at the time of the short sale you were delinquent or current on you payments. In the event that you were not delinquent you will find that your application is favorably considered. In order to qualify for the best home mortgage loans under these circumstances you will need to have a 12 month record of mortgage payments made in time before the short sale. You will also need to show that the creditors you pay in installments were also settled within 12 months.

One of the things that are important to note when you are applying for this loan is that the FHA does not just take note of how well you paid off your mortgage, but on how well you did on your other debts as well. With the new back to work program, many who have gone through a short sale may get a respite even though they were not able to pay off their other debts sufficiently or in time. This program is a lot more lenient than the previous ones.

In order to qualify for this program after your short sale you will need to show proof that you had lost your job or your source of income such as a business that had suffered. The circumstances leading to this loss need to be out of your control. You will also need to take a counseling class on home ownership. If you skip this important requirement your loan will be denied. This housing counseling only takes an hour and is therefore not tedious. Every person asking for a loan under this program is handled as an individual to ensure that they get time to speak up and discuss the events that caused the short sale and how they have recovered from the said economic downturn.

If you follow the FHA’s guidelines, you can find some of the best home mortgage loans. You will, however, need to ensure that you have all of your ducks in a row. Paperwork such as your W2’s and tax returns need to be part of the application as proof of your economic event. If you had to shut down your business you will need proof of that as well. For those who were fired from a job, your letter of termination will be important. With this documentation get a qualified underwriter who will do a good job of filing the application so that you can get the money you need to purchase your dream home.