How to Approach a Second-Chance Mortgage After Foreclosure

Beginning a new home loan application through “Back to Work”

Don’t be intimidated by complex loan processes; use these steps to help you get back in the housing world after foreclosure.

1. Find the right lender
 Most lending agencies and banks turn away families who have faced substantial economic events in fear that it will happen again. However, agencies that offer the “Back to Work” program are understanding and will listen to your story. They have experience handling financial problems just like yours. The program is offered at lending agencies in all fifty states, which is designed for families who need a second-chance mortgage after foreclosure or another economic event.

2. Take housing counseling
You may be surprised by what you could learn from a housing counselor. Although your economic event may have been out of your control, a housing expert could provide you with life-changing financial advice. The FHA requires all “Back to Work” participants to complete at least one hour of one-on-one housing counseling. The agency must be approved by the U.S. Department of Housing and Urban Development and take place at least 30 days, but no more than six months prior to submitting a new loan application.

Housing counseling is designed to help families avoid making the same mistakes twice. They teach how to avoid scams and how to create and assess a household budget. Perhaps most importantly, they teach how to avoid repeating the same economic event again. This gives borrowers and lending agencies confidence that beginning a new home loan is a good idea.

3. Boost your credit
Although an event like foreclosure will stay on your credit history report for up to seven years, it’s never too early or too late to start boosting your credit score. “Back to Work” participants must have credit scores above 500. Borrowers must be able to provide a 12-month credit-history report that is clear of late housing, installment debt payments, delinquency and any other derogatory credit issues. Those with no credit whatsoever remain eligible.

4. Gather documentation
All “Back to Work” borrowers must be able to provide proof of a previous economic event. This can be shown through a Verification of Employment (VOE), W-2 form, old pay stubs or signed tax returns from the past two or three years. Lenders will also want to see recent copies of your pay stubs (30 days worth), and a clear copy of both your driver’s license and Social Security card.

If you receive additional income from Social Security, child support, alimony or a pension award, provide proof that will verify it. Also bring bank statements from the past two or three months from every checking and savings account you have, as well as 401K or other stock accounts. Any person who is signing the loan should bring all of these documents to apply for a new mortgage. This will help determine your financial situation after foreclosure and if the “Back to Work” loan is the right second-chance mortgage for your family.

Mortgage restructure might be in your future

The housing market crash of 2008 devastated millions of families, many of which are still in battle. Job loss, foreclosure, short sale, bankruptcy, among other financial crises left mortgagees under the dust, behind on billing statements and in a search for a more promising monetary life.

Fortunately, the government recognized this problem last August. During a speech in Phoenix, President Barack Obama said, “We should give well-qualified Americans who lost their jobs during the crisis a fair chance to get a loan if they’ve worked hard to repair their credit.”



The “Back to Work - Extenuating Circumstances” lending program does just that — across the United States, the mortgage restructure offers a second chance by allowing families to apply for a new mortgage only 12 months after losing their home.

The Federal Housing Administration’s Mortgagee Letter 2013-26 states, “FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

Those in the program do not face premiums nor additional fees at closing. In fact, the program is designed for families afraid of complex loan processes and those who have been turned down by other banks. Lenders are making it easy for those with negative credit histories.

To apply, borrowers must first have a home mortgage lender that offers the Back to Work program. Secondly, the family must be demonstrating a full recovery from at least one type of financial crisis, including prior foreclosure, prior short sale, bankruptcy, deed-in-lieu, loan modification or forbearance agreement.

Borrowers must agree to attend at least one hour of one-on-one housing counseling, required by the FHA. Mortgagee Letter 2013-26 states, “Housing counseling enables borrowers to better understand their loan options and obligations, and assists borrowers in the creation and assessment of their household budget.”

Still struggling and searching for a shorter waiting period? Looking for a more promising mortgage restructure? A home mortgage lender offering the “Back to Work” program is waiting to help.