The Federal Housing Administration (FHA) recently enacted a rule change allowing borrowers who have fallen into foreclosure, bankruptcy, or a short sale to become eligible for a brand new mortgage backed by the FHA in as little as one year from the date of their previous foreclosure, the date of closing on a short sale, or the discharge date on a bankruptcy.
Considering the previous waiting period for a government-backed mortgage was three years, this new program is great news for buyers who had all but accepted the reality of becoming renters for the foreseeable future.
Effective Date - The program is effective for case numbers assigned on or after August 15, 2013 through September 30, 2016.
Requirements - In order to qualify for the reduced waiting period, buyers must provide proof of suffering an economic event that caused them to fall into financial instability. Examples of such an economic event include: a loss of job; a 20 percent or greater reduction in income for six or more month; a death of a wage earner; or a serious medical issue.
Furthermore, buyers must also provide documentation of a clean financial record for the past 12 months and show their ability to make the payments on their newly proposed mortgage. The buyer is also required to complete a course on housing counseling.
FHA Back to Work – Question & Answers
• How do I apply for the program?
You can apply for an FHA Back to Work - Extenuating Circumstances mortgage with any FHA-approved lender. The mortgage approval process is the same for any other FHA-insured mortgage.
• 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".
• What are mortgage rates for the FHA Back to Work program?
Mortgage rates are the same as mortgage rates for any other FHA loan. There is no premium on your interest rate, nor are there additional fees to pay at closing. Your mortgage rate will be unaffected by the FHA Back to Work program.
Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan. He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods. Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce. You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.
Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan. He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods. Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce. You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.
