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?

Three Things To Know About The FHA’s New Home-Buyer Loans

The FHA’s affordable home-mortgage loans have a new purpose and some new rules

If you are a potential first-time homebuyer or a repeat homeowner who has faced previous financial difficulties, now is a great time to take a step into the housing market for the FHA’s new homebuyer loans.

The FHA created a program designed for anyone who has faced an economic event — any occurrence beyond the borrower’s control that results in a loss of employment or a loss of income of 20 percent or more for a period of at least six months. If you can relate, here are three things you should know about the “Back To Work” program.


1. This loan is designed for families who are regaining financial stability
“Back to Work” was launched to save families who would otherwise be turned away from lending agencies and banks. Since events like foreclosure and bankruptcy stay on a borrower’s credit history for up to seven years, most lending agencies don’t want to risk the chance of a negative event happening again. However, the FHA has recognized that an economic event does not determine whether a borrower can fully recover and repay a loan. The program reduces the long waiting period after losing a home to only 12 months. Normally, families have to wait several years. The program also allows borrowers to put only 3.5 percent down with no premiums or fees at closing.

2. Prospective borrowers must be able to provide proper documentation
Lenders will offer a second-chance mortgage to almost any borrower who qualifies. To be eligible, each person who is signing the loan must be able to provide the lender with proper paperwork that shows proof of a past economic event. The family must also meet general requirements in terms of employment, income and credit. To begin, make clear copies of each signer’s driver’s license and social security card. Gather other necessary items, such as 30 days worth of recent pay stubs, tax returns, W-2 forms, and bank statements. Your statements should include all of your checking and savings accounts, any 401K and other stock accounts. Also be sure to gather the proper documentation for other additional income, such as child support, alimony, Social Security or a pension award. Your lender will need to see all of these items, and possibly a few others, to determine if the “Back to Work” program is right for your situation.

3. The FHA requires participants to complete one hour of housing counseling
For borrowers to become eligible for the FHA’s affordable home-mortgage loans, lenders ask prospective borrowers to complete housing counseling at least 30 days, but no more than six months prior to submitting a loan application. Counselors are required to address the cause of the economic event to ensure borrowers know how to avoid making the same mistakes twice. They also help families create and assess a household budget and teach them how to avoid scams. The overall goal of counseling is to better prepare families for future financial shocks and instill good financial habits.

New Home Buyer Loans to Choose From

It is time for you to buy a new home, in fact you have been thinking about it for a while now. The time is right. You have looked at your goals and worked through the amount of money you have. You can afford a mortgage and there are many different types available. There are several kinds of new home buyer loans available and all you have to do is pick one.

One type of mortgage that is available to you is a fixed rate mortgage. This one is popular because the borrower tends to be protected from hikes in the amount of money they pay from one month to the next. It is a straight forward mortgage. The advantages of this kind of home loan include its stability. You know what you need to pay every month for both the principle as well as the interest. The amount remains the same for the duration of the loan repayment. In addition, whether the interest goes up or not, the payments do not change.



This is something to think about even as you make your decision. This kind of loan makes sense when you are making plans to live in the same house for many years or when you want to work with a strict budget. When you know what the amount you are required to pay per month is, you can make plans with ease.

If you have had an economic event that has adversely affected your finances you would need to consider a back to work loan as your first one. This loan allows you to make a new start if you have had some financial challenges in the past. It is among the new home buyer loans but can also be taken out by those who have owned a home previously and lost it. If you have suffered foreclosure, forbearance, bankruptcy, a short sale or anything of that sort you can get a loan that will allow you to own a home again.

This loan is a great idea because the down payment can be as low as 3.5% and the interest rates are not any higher than those of a regular loan. One of the things you will need to prove before you can get such a loan is that you suffered an economic event and you were a responsible debtor. With such information you are simply reinstated back to the place that you were before.

You will, however, need to prove that you have recovered from the economic event that affected you. Make sure you have a source of income and your credit history is clean for a period of 12 months.