If you’ve recently had a foreclosure, short sale or have declared bankruptcy due to extenuating circumstances, there’s some good news:
The Federal Housing Administration’s Back To Work Program can help you shorten the waiting period to buy a home to as little as one year after you’ve had a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.
Here are some FAQ that will help explain the program details:
Which types of “events” are covered by the FHA Back To Work – Extenuating Circumstances program?
The program can be used by anyone who’s experienced a pre-foreclosure sale, short sale, deed-in-lieu, foreclosure, Chapter 7 bankruptcy, Chapter 13 bankruptcy, loan modification; or who has entered into a forbearance agreement.
Does the FHA Back To Work program waive the traditional 3-year waiting period after a foreclosure, short sale, or deed-in-lieu?
Yes, the program waives the agency’s three-year waiting period. You no longer need to wait three years to apply for an FHA loan after experiencing a foreclosure, short sale or deed-in-lieu.
Does the Back To Work program waive the traditional 2-year waiting period after bankruptcy?
Yes, the program waives the agency’s two-year waiting period. You no longer need to wait two years to apply for an FHA loan after experiencing a Chapter 7 or Chapter 13 bankruptcy.
What are the minimum eligibility requirements of the FHA Back To Work program?
In order to qualify, you must meet several minimum eligibility standards. The first is that you must have experienced an “economic event” (e.g.; pre-foreclosure sale, short sale, deed-in-lieu, foreclosure, Chapter 7 bankruptcy, Chapter 13 bankruptcy, loan modification, forbearance agreement).
The second is that you must demonstrate a full recovery from the event. And, third, you must agree to complete housing counseling prior to closing.
You must also show that your household income declined by 20% or more for a period of at least 6 months, which coincided with the above “economic event”.
How do I document a 20% loss of household income for the FHA?
In order to document a 20% loss of household income, you must present federal tax returns or W-2s, or a written Verification of Employment evidencing prior income.
For loss of income based on seasonal or part-time employment, two years of seasonal or part-time employment in the same field must be verified and documented as well.
Income after the onset of the economic event, which should represent a loss of at least 20% for at least six months, should be verified according to standard FHA guidelines.
This may include W-2s, pay stubs, unemployment income receipts, or other. Your lender will help you determine the best method of verification.
I’m Still Not Sure…
If you’re in this type of situation, and are unsure whether you quality for this program, feel free to get in touch with me. The mortgage brokers I deal with have a wealth of experience in working through these types of issues with clients.
I can also refer you to lenders who provide conventional mortgages that are not FHA-backed. This can be a good option for folks who don’t meet the Back To Work program requirements. Call or text me anytime at 571-305-2405, or drop me a note at lsagatov@kw.com
Cheers!
– Lou