Have you had a short sale or foreclosure in your past but now you are ready to buy again? Well great news, your new home purchase can be made sooner than you thought. The Federal Housing Authority (FHA) has shortened the mandatory waiting periods for homeowners with a short sale, foreclosure, deed-in-lieu, or even bankruptcy, and allowing them to buy again through an FHA loan. This new program is called the FHA’s Back to Work – Extenuating Circumstances Program, which allows borrowers who had originally lost their homes due to financial hardships, to be eligible for an FHA mortgage much sooner than before.
Instead of waiting the three or more years before qualifying for a new mortgage loan, now the minimum waiting period is only one year. The buyer will have to be able to prove that over the past 12 months they are now financially stable and capable of taking on a mortgage payment again.
This program is going to be strict in who it helps and borrowers must jump through a few hoops in order to satisfy its requirement.
First, they must prove that the foreclosure or short sale was caused by what FHA calls an “economic hardship event” such as loss of income or employment, or a combination of both, that was beyond the control of the home owner. The economic event must have also caused a household income reduction of 20 percent or more for at least six months.
Second, you must prove that there is no longer the financial crisis that led to the foreclosure, short sale or bankruptcy. For example, if a borrower had a foreclosure due to losing his job, the borrower must then prove that he or she is now employed and able to afford to make the mortgage loan payments.
Thirdly, the borrower must also prove that his or her credit was in good standing before the economic hardship event. This means that your credit report was free from late payments or any other major derogatory credit issues. It also has to be shown that since the foreclosure, satisfactory credit has been re-established over the past 12 months.
Once all of that is in place, borrowers must complete one hour of one-on-one housing counseling from an approved counselor of the Department of Housing and Urban Development. This must be finished at least 30 days but no more than six months before applying for an FHA loan.
Beyond helping homeowners who struggled during the tough times of the recession, the FHA Back To Work program could also help the housing market by putting more buyers in a better position to purchase a home. These are people who are going to buy a home and stay there!
“This is what the market needs, new people coming in and buying homes to live in,” Vener said. “This whole real estate debacle is not going to be cured by real estate investors buying homes, renting them and hoping to flip them at some point.”
If you would like to contact me for more information on this or any other program, please feel free. I am currently lending in the state of Florida only and located in Lee and Collier County areas for local mortgage lending.
Email tanya@bestmortgage loan.net