Showing posts with label Back to Work mortgage loan. Show all posts
Showing posts with label Back to Work mortgage loan. Show all posts

Thursday, January 16, 2014

Back to Work home loan requirements

The FHA and “Back to Work” mortgage lenders agree to set up home loan requirements

Beginning a new home loan can be an intimidating task because it seems there is so much to worry about. There are mortgage rates, premiums, fees at closing, waiting periods and credit requirements. Many lenders turn families away if their situation isn’t up to par.

Fortunately, the Federal Housing Administration (FHA) stepped in last August to make beginning a new home loan easier for the fearful. Back to Work mortgage lenders cut down extensive waiting periods, which can be up to three years. Through the program, borrowers can begin a new loan only 12 months after losing their home.



The program is designed for families who have faced an unfortunate economic event, such as foreclosure, deed-in-lieu, short sale, bankruptcy or any other financial downturn that significantly affects a household’s income.

“An economic event is 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,” Mortgagee Letter 2013-26 states.

In the program, mortgage rates are the same as any other FHA loan and borrowers may put down only 3.5 percent on a new mortgage with no premiums nor other fees at closing.

The FHA requires at least one hour of one-on-one housing counseling, which allows borrowers to receive more information on their loan options, obligations and how to set up a household budget.

Housing counseling must be approved by Housing and Urban Development and must address the cause of the family’s reduction in income. Counseling is to be completed a minimum of 30 days, but no more than six months prior to beginning a new loan.

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

Another requirement by the FHA is satisfactory credit, where many may begin to cringe. As long as the borrower’s credit history is clear of late housing and installment debt payments, and the borrower’s credit score is above 500, there shouldn’t be anything to worry about. If a borrower has no credit score whatsoever, he or she remains eligible.

And if a borrower is facing Chapter 13 bankruptcy and has not yet been discharged, he or she must obtain written permission from the Bankruptcy Court to begin a new Back to Work home loan.

Mortgagee Letter 2013-26 states, “FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances.”

Tuesday, January 14, 2014

How to get a Back to Work mortgage loan after losing a job

The FHA’s “Back to Work” home mortgage promises a more stable financial future

Losing a job is tough in our economy — there are car payments, cell phone bills, the rising cost of gas, and most importantly, house payments. No family wants to worry about losing where they call home, and for those that have, it’s devastating.

August 15 of last year, the Federal Housing Administration (FHA) launched its Back to Work mortgage loan, in which borrowers facing an unfortunate economic event can apply for a new home mortgage loan only 12 months after losing a home.

The 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 hold income of 20 percent or more for a period of at least six months.” This applies to everyone in the household, not only one member.

To verify a loss of employment, the lender must receive a document evidencing the termination or loss of business.

The Back to Work home mortgage waives lending agencies’ traditional two or three year waiting periods and replaces them with only 12 months. Instead of waiting around, borrowers can now look for a new home and mortgage almost immediately.

However, the FHA does place some requirements. To be in the program, borrowers must agree to attend at least one hour of one-on-one housing counseling. The counseling must address the cause of the economic event, as well as enable the borrower to better understand loan options, obligations and how to manage money in his or her home.

Counselors assist borrowers in creating a household budget, as well as provide tips on avoiding scams and better preparing for future financial shocks.

The counseling must be Housing and Urban Development approved and completed between 30 days and six months prior to submitting a new mortgage application. This may be completed in person, via telephone or online. A list of participating agencies can be found at www.hud.gov.

“Housing counseling is an important resource for both first-time home buyers and repeat home owners,” the FHA said. “FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances.”

Another requirement is satisfactory credit. This means the borrower’s credit history must be clear of late housing and installment debt payments. Credit scores below 500 are not allowed, but borrowers with no credit score are eligible in the program.

If your current lender is not taking part in “Back to Work” home mortgage, it’s not too late to switch. The program does not end until September 30, 2016. Once in the program, borrowers may put down only 3.5 percent on a new mortgage with no premiums nor additional fees at closing.