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.

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.

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.

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.

Will Back to Work Program Lenders Think You’re At Good Risk?

Lenders follow procedure to determine if borrowers are eligible for new home mortgage loans

An economic event like foreclosure, short sale or bankruptcy gives borrowers a handful to worry about. Recovering from extreme credit issues is a long process that takes years to amend. What’s more stressful then wondering if a new mortgage lender will consider you creditworthy, or in other words, a good risk?

Mortgage lenders carefully inspect the backgrounds of each of their loan applicants. Lending money to buy a home is a long-term risk that should not be taken lightly, especially with prospective borrowers who have histories of negative economic events. Although borrowers are obligated to make loan payments on time, that is not always the case, especially when a borrower has a poor credit history.

Even though the Federal Housing Administration’s Back to Work program is designed for families with previous financial hardships, lenders continue to look for satisfactory credit in their borrowers. This implies that borrowers with late housing, installment debt payments, delinquency and other derogatory credit issues are not accepted into the program.

The mortgage process usually begins with a lending representative interviewing the prospective borrowers face-to-face, online or by phone. Many lenders will offer loans to eligible families before they ever shop for a new home. This option allows borrowers to have an idea of how much money they have to work with, thus saving them time and preventing disappointment. Borrowers should be sure to bring their bank account numbers, credit card bills, pay stubs, W-2 forms and other proof of employment history.

The most important document during this process is the loan application. The application will give your lender the opportunity to assess your risk value and creditworthiness for a new mortgage. There will be questions about your income, liabilities, credit, assets and the home you wish to buy.

Once a lender is able to prove a borrower’s eligibility, the lender will analyze the risk of lending to establish an appropriate interest rate and loan term. There is no standard or formula for offering rates, but most lenders follow the rates of government-related agencies.

Back to Work program lenders allow borrowers to put down only 3.5 percent on a new loan with no premiums nor fees at closing.

If it’s possible to offer you a loan, lenders typically do what they can to make it happen. However, “Back to Work” program lenders do not want to approve a loan where the borrower will have late payments and eventually become delinquent. The best thing you can do while you’re waiting is to boost your credit score. Your local mortgage expert will be able to provide tips on how to raise credit while in your specific situation.

Back to Work Program Lenders

Did you have a past financial hardship (lost job, reduction in income, etc.) that caused you to lose your home?  If you had a foreclosure or declared bankruptcy but are now regaining your financial stability feel encouraged.  A new home may be in your near future!  You may qualify for a new home loan under the Federal Housing Administration Back To Work Program.  The Federal Housing Administration (FHA) recognizes that many homeowners struggled with unemployment or wage reductions as a result of the recent recession.  These extenuating circumstances made borrowers unable to meet their monthly mortgage payments.  Unfortunately the result was they ultimately lost their homes.  If this situation describes you be reassured.  The new Back to Work Program allows borrowers to purchase a new home 12 months after the previous foreclosure or bankruptcy.    

1st Alliance Lending is a Back to Work Program Lender that will work closely with you to help you navigate your options for returning to home-ownership.  We will guide you every step of the way.  

1st Alliance Lending can help you determine if you meet the FHA loan requirements which include documenting the mortgage issues you experienced that were caused by the financial hardship, showing that you have rebounded and re-established your credit, and completing housing counseling.  To verify that you have re-established your credit you need to pay your rental payments on time for 12 months and not be 30 days late on more than one other loan payment.  The housing counseling course is approved by the Department of Housing and Urban Development (HUD).  The course counselor will work closely with you to verify your ability to afford the mortgage, help you establish your household budget and explain the loan application process and mortgage insurance.  This will help insure success with your new home.

1st Alliance Lending takes pride in helping borrowers obtain mortgages they can afford long term.  We frequently work with borrowers who have had a financial hardship and are re-entering the housing market.  We want to help you have a successful mortgage long into the future.  Contactus if you would like to find out more about the Back to Work program.

The Back to Work Lending Program Changes the Future of Mortgages

What happened in 2008 and what the Back to Work loan program is doing now

When a dramatic rise of mortgage delinquencies and foreclosures began to spark in 2007, the housing market had no path of return after many financial institutions closed their doors by Sept. of 2008. Housing experts note that the crash’s main cause was sub-prime lending; this is referring to loan arrangements with high interest rates for borrowers with poor credit histories.

From 2004 to 2006, sub-prime mortgages rose from 8 percent to 20 percent, according to the University of North Carolina’s Department of Statistics. Over 90 percent of sub-prime mortgages in 2006 were adjustable rate, meaning its rate will change in accordance with the market’s conditions. By 2007, adjustable rates began to reset with higher interest rates, causing higher monthly payments for borrowers. The number of mortgage delinquencies began to soar and global investors became uninterested in purchasing mortgage-related securities.

Borrowers began to dramatically change financial paths, applying for foreclosure, short sale, deed-in-lieu, forbearance agreement, loan modification, Chapter 7 bankruptcy and Chapter 13 bankruptcy. The Federal Housing Administration (FHA) now calls each of these financial situations “economic events,” which happen in result of a loss of employment or income of 20 percent or more for a period of at least six months.

After five years of battle, the FHA developed the “Back to Work - Extenuating Circumstances” program to help recovering families. Traditionally, lending agencies required borrowers to wait several years before applying for a new mortgage loan after an economic event. Through the program, families may apply for a new mortgage only 12 months after losing a home. Borrowers may put down 3.5 percent on a mortgage with no premiums nor fees at closing.

Lenders must be able to verify and document a borrowers’ loss of employment or income through a written document that shows evidence of a termination date or where a prior employer is no longer in business.

Interested borrowers are required to complete housing counseling, which is a one-hour session with an expert approved by the U.S. Department of Housing and Urban Development. Counseling must address the cause of the economic event and may be completed in person, online or by phone.

Mortgagee Letter 2013-26 states, “Housing counseling is an important resource for both first-time home buyers and repeat home owners.”

The Back to Work lending program also requires all borrowers to have a satisfactory credit history for at least 12 months. Credit scores below 500 are not allowed in the program, but borrowers with no credit score remain eligible. Late housing, installment debt payments and delinquency negatively affect a borrower’s eligibility.

Distressed families still looking for a new home mortgage can contact a lending agency that offers the Back to Work loan program. The program runs through Sept. 30, 2016.