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.”
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.”
