FHA Back to Work Program

Delaware FHA Loan Update Effect August 15, 2013

FHA Back to Work Loan Program – HUD released a new Mortgagee Letter 2013-26 and made it effective August 15, 2013, which was title FHA Back to Work – Extenuating Circumstances.  The new guidelines allow borrowers who have experienced an Economic Event that resulted in a severe reduction in income that lead to a short sale, foreclosure, and/or bankruptcy to shorten the required wait time to a minimum of 12 months.  The normal wait times are from 2 to 3 years from the derogatory event.  If you would like to apply for the Back to Work Program you can call 302-703-0727 or apply online at Delaware FHA Mortgage Application

The new guidelines for the FHA Back to Work Program are only for new purchase loans for purchasing a new home.  The normal FHA underwriting guidelines must be used such as credit score requirements, income requirements, etc.  The only thing being changed is the wait time since the derogatory event.  The following guidelines must be met in order to qualify for the FHA Back to Work Program:

1. The loss of employment or income was due to an extenuating circumstance beyond his or her control and can be documented
2. Satisfactory credit history has been restored for a period of 12 months
3. Housing counseling has been completed

Loss of Employment or Income from Economic Event – The Economic Event is any occurrence beyond the 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 twenty (20%) percent or more for a period of at least 6 months.

The onset of an Economic Event – This is defined as the month of the Loss of Employment and/or Income.

Recovery from an Economic Event is the re-establishment of Satisfactory Credit for a minimum of 12 months.  The borrower needs to not have any new collections, judgments, tax liens in this 12 month period.  The borrower can have no more than one 30 Day late on payments due to other creditors.  The borrower must also have the minimum credit score for an FHA loan program which would be at least 580 FICO score in order to only put down 3.5%.  If the score is less than 580 then would need to put down at least 10% of the purchase price.

Borrower Household Income – The gross income of the borrower and all Household Members for the purposes of assessing the loss of income.  The gross income of each Household Member must be computed in accordance with FHA income requirements.

Household Member – An individual residing at the borrower’s primary residence at the time of the Economic Event and how was a co-borrower on the borrower’s previous mortgage.

Housing Counseling – Housing counseling MUST be completed 30 DAYS PRIOR but no more than 6 months prior to mortgage application!!!  Must be done with HUD-approved housing counseling.

The borrower can also have had a loan modification that brought the loan current which may have been “temporary” or “permanent” so long as all payments have been documented as being received in accordance with the modification agreement.

Acceptable documentation for the Loss of Employment by obtaining:

1. Written Verification of Employment evidencing the termination date or
2. Written Termination Letter or
3. Publicly Available documentation of business closure and documentation of receipt of unemployment income

Acceptable documentation for Loss of Household Income:

1. Written verification of employment evidencing prior to income or
2. Signed Tax Returns or W-2s evidencing prior income

Economic Event-Related Mortgage Foreclosure

1. Minimum of 12 months have elapsed since the date of foreclosure or deed in lieu and
2. Foreclosure or deed-in-lieu was the result of the Economic Event

Economic Event-Related Short Sale

1. Document minimum of 12 months have elapsed since the date of sale and
2. the Short Sale was a result of the Economic Event

Economic Event-Related Chapter 7 Bankruptcy

1. Minimum of 12 months have elapsed since the date of discharge of the bankruptcy
2. Bankruptcy was the result of the Economic Event

Economic Event-Related Chapter 13 Bankruptcy

1. Chapter 13 bankruptcy was discharged prior to the loan application and all required bankruptcy payments were made on-time or a minimum of 12 months of the payout period under the bankruptcy has elapsed and all required payments were made on time
2. Bankruptcy was the result of the Economic Event

FHA Back to Work Program Expires September 30, 2016

Call 302-703-0727 to schedule a mortgage consultation to get pre-approved for a mortgage to purchase a home or to refinance your existing mortgage to lower your rate and save thousands of dollars in interest. There are several special governments refinance programs to help underwater Delaware homeowners refinance. There is the FHA Streamline Refinance Program, the VA IRRRL Streamline Refinance Program, and there is the HARP 1.0 and HARP 2.0 refinance programs. Call us or e-mail us now to get more information or you can APPLY ONLINE

John R. Thomas – NMLS 38783

Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

248 E Chestnut Hill Rd, Newark, DE 19713