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.
