Did you know that FHA made a rule change that will let you qualify in one (1) year for another home after a bankruptcy and a foreclosure? That’s right! If you have repaired your credit and gone thru a foreclosure or bankruptcy, you have become eligible to purchase a new FHA loan.
Don’t get excited yet, read this article.
Previously homeowners that had filed bankruptcy or suffered from a foreclosure had to wait a minimum period of 3 years prior to buying another home.
To qualify for the new FHA loan, known as Back to Work Program, you must show that the foreclosure or bankruptcy was the result of a
1) job loss or
2) your income was reduced by 20% that was beyond your control.
That’s not all, you must be able to prove that your income has had a “full recovery” and you have gone to housing counseling.
You must provide documentation that proves your hardship via termination/layoff notices, W-2’s, tax returns, bankruptcy documentation, and foreclosure action. In addition, rent/mortgage payments must not be late, no late payments on revolving or installment credit more than 30 days and no collection accounts.
The Back to Work program is specifically designed for homeowners that can demonstrate a 1+ year speedy recovery and can prove that their credit has recovered from the hardship. In most cases, this program will be offered to homeowners that still remain in their homes after the foreclosure and have proven to their lenders that their credit and hardship has been restored to qualify for the Back to Work loan.
Needless to say, don’t count on every lender /bank subscribing to this program. Many lenders/banks who are still undergoing lawsuits and investigations for their predatory lending practices, might not be so receptive to embrace the idea of financing what they consider a high-risk loan. Therefore, if you are applying for this loan program make sure that your loan officer has researched and studied this program well before getting your hopes high. The loan officer should be well-versed on which lender(s) has engaged this program. Be aware that the program is short-lived until 2016.
I hope this article has given you some insight on the pros and cons of this program and wish you success in your speedy recovery to purchasing another home.