The FHA "Back To Work" Program Is Official
Effective August 15th 2013
Loans failing to meet FHA mortgage guidelines do not get insured, and the Federal Housing Administration has been steadily tightening its requirements since last decade's housing downturn.
On August 15, 2013, the Federal Housing Administration moved to relax its guidelines for borrowers who "experienced periods of financial difficulty due to extenuating circumstances".
AKA the "Back To Work - Extenuating Circumstances Program", the FHA removed the standard waiting periods that typically followed a derogatory credit event.*
If you've experienced any of the following financial difficulties, you may be program-eligible :
- Short sales
- Chapter 7 bankruptcy
- Chapter 13 bankruptcy
- Loan modification
- Forbearance agreements
FHA understands that, sometimes, credit issues may be beyond your control, and that credit histories don't always reflect a person's true ability or willingness to pay on a mortgage.
Find out if the FHA's Back to Work - Extenuating Circumstances program applies to you.
What are the minimum eligibility requirements of the FHA Back To Work program?
In order to qualify, you must meet several minimum eligibility standards. The first is that you must have experienced an "economic event" (e.g.; pre-foreclosure sale, short sale, deed-in-lieu, foreclosure, Chapter 7 bankruptcy, Chapter 13 bankruptcy, loan modification, forbearance agreement). The second is that you must demonstrate a full recovery from the event. And, third, you must agree to complete housing counseling prior to closing. You must also show that your household income declined by 20% or more for a period of at least 6 months, which coincided with the above "economic event".
How do I document a 20% loss of household income for the FHA?
In order to document a 20% loss of household income, you must present federal tax returns or W-2s, or a written Verification of Employment evidencing prior income. For loss of income based on seasonal or part-time employment, two years of seasonal or part-time employment in the same field must be verified and documented as well. Income after the onset of the economic event, which should represent a loss of at least 20% for at least six months, should be verified according to standard FHA guidelines. This may include W-2s, pay stubs, unemployment income receipts, or other. Your lender will help you determine the best method of verification.
*Standard Wait Periods without the “Back To Work” Exception are:Chapter 7
- FHA- 2 Years
- VA- 2 Years
- Conventional- FNMA and FHLMC 4 years
· FHA- 3 Years
· VA- 2 Years
· Conventional- FNMA and FHLMC 7 years
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