The FHA, or Federal Housing Administration, has many programs designed to assist new and repeat home buyers to get an FHA insured loan. One of the newer programs is call the FHA Back to Work program, which is designed to help home buyers who have experienced a bad economic event get into an FHA insured home loan.
The program has a few basic requirements. First, the home loan must be from an approved FHA mortgage lender. Although most home mortgage lenders are FHA approved, not all of them are, and it is important to be sure of your lender’s status with the FHA before you begin the loan approval process.
The second requirement is that the loan must meet the minimum standards of FHA mortgage guidelines. These requirements are fairly straightforward, and any FHA approved mortgage lender can give exact specifications for how these requirements can be met. However, some of the guidelines for FHA approved mortgage are that the borrower must show a minimum credit score of 580, with an income that is verifiable via W-2s or other tax documents. Borrowers also must put 3.5 percent of the purchase price down on the home.
The FHA Back to Work program allows qualified buyers who have experienced a severe economic event the ability to get into a home or back into a home, as the case may be. Some of the qualifying economic events are foreclosures, short sales, deeds-in-lieu, bankruptcy and forbearance agreements. There are other qualifying events that render a borrower eligible for this program, but those are some of the most common.
The goal of the Back to Work program is to provide a second chance for home buyers that have experienced financial hardship as a result of the economic downturn. The program is available to first-time home buyers as well as to repeat home buyers. The program works for those who are obtaining an FHA construction loan as well as those who are buying a traditionally built home.
FHA Back To Work Program Advantages
One of the greatest advantages of the FHA Back to Work program is that it waives the waiting period after foreclosures, short sales, and bankruptcy. As people who have experienced these events are doubtless well aware, there is traditionally a three year waiting period after a foreclosure or short sale before an applicant can try again to purchase a home. Similarly, there is a two year waiting period after bankruptcy before a borrower can attempt to purchase a home. The Back to Work program waives these waiting periods, allowing a person who has experienced one of those events to get back onto their feet faster than they would be able to otherwise.
In order to apply for this program, you simply apply for it when you apply for a home mortgage with an FHA approved mortgage lender. The approval requirements are the same as for a normal FHA mortgage and the approval process runs concurrently with the home loan application, so there is no extra time or effort that is required in order to get into the program.
The mortgage rates for an FHA loan in the Back to Work program are the same as the rates for the FHA program in general. There are no additional fees or additional points on a Back to Work program mortgage compared to a regular FHA mortgage. The program is entirely free to the users of the program.
In order to qualify for the FHA Back to Work program, a borrower must demonstrate that they have experienced a qualifying “economic event” such as bankruptcy, foreclosure or a short sale. It is necessary to demonstrate that the household income decreased by at least twenty percent for at least six months at the same time as the adverse economic event. Additionally they have to demonstrate that they have completely recovered from that economic event and that their finances are now in order. Finally, a borrower will have to agree to complete housing counseling before closing.
Demonstrating complete recovery from the adverse economic event is a bit more tricky. By going through a borrower’s credit report, the lender will attempt to determine that the borrower had a good credit history prior to the adverse event, that the delinquency was only during the event, and that since the event the borrower has demonstrated at least twelve months of perfect payment history on major accounts.
The housing counseling that is required by applicants to the Back to Work program is short, generally only an hour in length. The counseling can be completed in person, but there are also online and phone-based options to allow everyone to complete the counseling without issue.
The FHA Back to Work program is open and taking applications now and as of the date of this writing, the program is set to run until September 30, 2016. As long as a borrower has recovered from their adverse economic event and can qualify for a traditional FHA mortgage, they are able to participate in this program.
For those who have experienced economic hardship as a result of unemployment or other economic problems, buying a home can seem like a distant fantasy. However, with the FHA’s Back to Work program, even those with the worst economic problems can buy a house after twelve months of sustained, demonstrably economic recovery. The requirements for the program are not significantly more difficult than for a regular FHA loan, and there is no cost to the borrower to participate in this program. If you have suffered an economic setback, this program could be your key to homeownership.