For those still recovering from the housing crash of 2008, the Federal Housing Administration’s “Back to Work – Extenuating Circumstances” program may seem like a miracle. Online home mortgage lenders are now allowing borrowers to apply for a new, sustainable home loan without a three-year waiting period. In fact, the waiting period for those who have faced a previous financial crisis is only 12 months.
Mortgagee Letter 2013-26 defines an economic event as “any occurrence beyond a borrower’s control that results in loss of employment, loss of income, or a combination of both, which causes a reduction in the borrower’s household income of 20 percent or more for a period of at least six months.” This includes families still suffering from loan modifications, prior foreclosure, prior short sale, deed-in-lieu, forbearance agreements and even bankruptcy.
However, in order to be eligible, families must be proving they’re reestablishing their credit. Satisfactory credit means the online home mortgage lender can see the borrower’s past 12 months of payment is clear of late housing and installment debt.
If a family can prove an economic event through documentation, as well as prove their credit score has been improving for at least twelve months, Back to Work program lenders will have no reason to keep a family out of the program.
Reentering the market may seem frightening, but realistically, a family’s financial future can only get better after hardship. This is why the FHA wants borrowers to receive at least one hour of one-on-one housing counseling with an approved agency. Addressing how an economic event originally happened helps to ensure a family won’t repeat the same mistake twice. Although “counseling” is usually negatively stereotyped, nothing could be better for a “Back to Work” borrower than reassurance on how to avoid saying, “I had a short sale, or “I had a foreclosure.”
If you or someone you know is still recovering from the housing crash, get in touch with a lender willing to work with a previous financial hardship through the Extenuating Circumstances program. Why continue waiting when there’s a program that’s able to help now?