FHA “Back to Work.”
Referred to as the FHA “Back to Work” program, this program was announced by FHA by way of Mortgagee Letter 2013-26 on August 15th, 2013. It features enhanced guidelines for home owners who experienced a bankruptcy, or lost their homes via short sale, deed-in-lieu, or foreclosure due to financial difficulties. “Back to Work” shortens the required wait period for borrowers wanting to buy a home again.
Quick Qualifying Guide
Here’s a quick breakdown of everything you need to know to quickly identify if you should follow up with a qualified lender for actual qualification.
Qualifying for Back to Work requires asking for an exception due to an economic event, which is defined as a 20% drop of income due to a loss of emplyment, and/or reduction of income for at least 6 months.
Eligible Economic Events
Loss of Income must be documented in one of two ways:
- A written Verification of Employment documenting the date and amount that income dropped, and when it was restored, or:
- Signed tax returns or W-2s showing a minimum 20% loss in Household Income
Loss of Employment must be documented by providing the lender:
- A written Verification of Employment (VOE) showing termination date, or:
- In cases where the your prior employer went out of business, a written termination notice, or:
- Other publicly available documentation of the business closure, and:
- Documentation of receipt of unemployment income
When Can I Buy Again?
You must demonstrate that derogatory credit occurred after an economic event onset, and you must have demonstrated satisfactory credit prior to your economic event. You can buy again with 12 months of on-time payments/satisfactory credit, and proof that you have recovered from your economic event.
Under the Back to Work Extenuating Circumstance exception, you can buy after bankruptcy, foreclosure, short sale or deed in lieu of foreclosure that was the result of a minimum 20% drop in income or loss of employment over a minimum of a 6 month period.
What to Expect
Please keep in mind that even though HUD and FHA recognize these hardships and are willing to allow borrowers who have faced these hardships to buy again before the current waiting periods, it doesn’t mean that all banks or lenders have to offer them. It’s not a law – it’s a guideline. I do offer this program.
Get on board now if you want to beat the rush!