FHA Mortgages After Foreclosure, Bankruptcy or Short Sale – Hard Times


By Joseph Small

FHA loan Tucson ArizonaTucson, Arizona – (FHA Back To Work loan program) Over the past few years, I have come across numerous people trying to get pre-qualified for a home loan after a bankruptcy, short sale or foreclosure. A lot of these borrowers had gone through their life hiccups as a result of some economic event – such as, being laidoff, unemployment, hours cut, a decrease in family income, to name a few.

Up until now, one the shortest way to get back into home ownership was to wait 2 to 3 years (2 years on a bankruptcy or 3 years on a foreclosure) with re-established credit and try to go with an FHA mortgage. Well, the Federal Housing Administration is about to change the wait times after hard times.

The FHA recently annouced that they recognize that a lot of borrowers have gone through tough economic hard times as a result of no fault of their own. As a result, the Federal Housing Admistration is going to make it easier for these once-struggling home buyers to qualify for an FHA insured home loan. Called the FHA Back to Work loan program, this will help a lot of people in Arizona, particuliarly in cities like, Phoenix, Tucson, Sierra Vista, as well as others throughout the state.

For these once-struggling borrowers who meet the new FHA requirements under this program, the FHA is going to trim to one year the amount of time that homebuyers must wait after a bankruptcy, foreclosure, or pre-foreclosure or short sale before they may qualify for an FHA backed home loan. So the two or three year normal wait period will just be ignored. But, like I said, there are certain requirements.

Borrowers must be able to show their household income fell by 20 percent or more for at least six months and was tied to an economic event that was beyond their control. They will also have to prove that they have completed at least one hour of approved housing counseling prior to application, among other things, as well as have re-established credit and can prove they have rebounded from the financial event.

From the FHA: “As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre- foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.

To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:

  • certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control
  • the borrower has demonstrated full recovery from the event; and,
  • the borrower has completed housing counseling.

Housing counseling is an important resource for both first-time home buyers and repeat home owners. Housing counseling enables borrowers to better understand their loan options and obligations, and assists borrowers in the creation and assessment of their household budget, accessing reliable information and resources, avoiding scams, and being better prepared for future financial shocks, among other benefits to the borrower. “ read more here: FHA Mortgagee Letter 2013-26 – Back to Work

If you feel that you might qualify or have any questions regarding this new FHA Back to Work mortgage program, then please give us a call.

520-303-5620 (Tucson) or 480-788-9221 (Phoenix).

Joseph Small and his Team at Guild Mortgage Company helps Tucson and Phoenix Homeowners with all their FHA home mortgage loan needs. Give them a call today! Also proudly serving Sierra Vista, Green Valley, Sahuarita and Nogales Arizona. Give them a call today! Maybe one day you too will say, “Joe’s My Lender!”

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