New FHA rules regarding mortgages can benefit certain groups of borrowers. The program, “Back to Work – Extenuating Circumstances,” allows a new FHA loan in the event of foreclosure, bankruptcy, short sale, or deed-in-lieu one year after the event.
A three-year waiting period is generally the rule for a new FHA loan in the case of foreclosure, and two years after a declared bankruptcy. Previous exceptions were made in the event of a medical emergency or the death of a spouse, which reduced the waiting time to one year. This new program adds a significant loss of income to the list of exceptions.
The eligibility requirements for the program in addition to meeting all other FHA loan requirements are:
Documented proof that a major loss of income occurred, defined as a minimum of 20% reduction of net income for a period of no less than 6 months, or permanent job loss has occurred
The borrower’s current income has been restored to the previous level
Satisfactory credit has been reestablished and no new derogatory credit after loss of the home
Agreement to a one-on-one counseling session with a HUD approved counselor for 1 hour
Looking for a HUD approved company that offers an online course?
“Satisfactory credit score” is defined as meeting the three following criteria for a period of 12 months:
No record of delinquency on the existing rental housing payment
No record of any payment to any creditor being more than 30 days late
No accounts in collection or court records reporting, except in the event of identity theft
Stated above are the requirements set by FHA. However, the actual determination of eligibility for a particular borrower will be decided by the individual lender, who may have stricter requirements that are preset by the lending institution.
Finally, there are other reasons why it is important to continue to shop around for a home loan. First, while one borrower may reject your application, another may approve it the very same day! Next, the rates and fees that will be charged may differ from one lender to another based on what a lender sees as a high-risk borrower.
Where you can start your search is Loan City Home Loans, a place that offers its customers on average 30 more loan quotes per request than its competitors.