Did you experience a one-time economic hardship event that ruined your credit?
The FHA Back To Work loan program can help get you into a home.
FHA recognizes that there are circumstances that are unavoidable, and that can impact a person’s ability to keep up with financial responsibilities. During the last recession, many borrowers who experienced unemployment or other severe reductions in income were unable to make their mortgage payments and lost their homes.
The hardship faced by this particular category of borrowers may not truly reflect their ability to repay a mortgage, so a second chance was given – the FHA Back to Work Loan Program was born.
The FHA Back to Work loan program provides a way for eligible borrowers to purchase a new home without first meeting the normal FHA required waiting periods.
In order to qualify, evidence must be provided to support that:
- Credit impairments were the result of a loss of employment or loss of household income beyond the borrower’s control: the “economic event”.
- There has been a full recovery from the event.
- Housing counseling has been completed.
The FHA Back To Work Economic Event is defined as any occurrence beyond the borrower’s control, such as a company lay off of shutting down, that resulted in a loss of employment income, loss of employment or a combination of both.
The onset of the economic event is determined by the month in which the loss of employment/employment income occurred.
The economic event is eligible ONLY if:
- It lasted at least 6 months
- Resulted in a 20% or more reduction in your income – the household prior income will have to be verified (an occupant co-borrower will be counted as well, while a non-occupant one will be disregarded).
All delinquent accounts and indications of derogatory credit will be analyzed and documented to determine that the occurrence was a result of the borrower’s “economic event”, and not an inability to manage debt/general disregard for managing financial obligations.
Please note that divorce is not considered to be outside of a borrower’s control, and is not an eligible economic event.
FHA Back To Work Loan Program credit requirements
Chapter 7 bankruptcies must have been discharged 12 months prior to loan application.
Chapter 13 bankruptcies must have been discharged prior to loan application. If the borrower is currently in a bankruptcy payment plan, 12 months on-time payment history is required, as well as written permission from the bankruptcy court to incur new debt.
Foreclosures – a minimum of 12 months wait is required. If the foreclosure was an FHA loan, 12 months must have elapsed since the actual date that FHA paid the initial claim to the lender. I can help you find out this date, please email me at [email protected]
Short sale/Pre-Foreclosure sale – 12 months must have elapsed since the date of the sale.
Credit Late Payments – no late housing payments or installment/revolving debt payments within the most recent 12 months (excluding medical collections).
Housing counseling must be obtained from a HUD approved housing counseling agency.
* The FHA Back To Work loan program counseling must be completed a minimum of thirty (30) days, but no more than six (6) months prior to loan application date
Besides these requirements, everything else about this loan program is identical to the regular Utah FHA mortgage loan.
If you still have questions, please send them by email – [email protected], or call me directly at (801) 473-3154.
If you think you may be eligible, fill out my easy, secure online application. Get started on your Utah FHA Back to Work loan program now.