This guide covers the ill-fated HUD’s FHA Back to Work Mortgage. The FHA Back to Work Mortgage no longer exists. This guide is a follow-up of an older HUD FHA Back to Work mortgage published on February 21st, 2018. The FHA Back to Work mortgage was a total disaster since the day it was launched. However, Gustan Cho Associates has other similar mortgage loan programs similar to the FHA Back to Work mortgage, such as non-QM loans. GCA Mortgage Group has non-QM loans with no waiting period after bankruptcy and foreclosure. The older edited version of HUD’s FHA Back to Work Mortgage Guide from February 21st, 2018 will be reposted in this guide for our viewers and loan officers who need to see what the program entailed. The FHA Back to Work Program waives the waiting period requirements after foreclosure, bankruptcy, and short sale to become eligible for FHA loans. In the following paragraphs, we will repost and edit a version of the original guide on FHA Back to Work Mortgage published on February 21st, 2018 and an updated version of the similar mortgage programs to the Back to Work Mortgage available today.
Updated FHA Back to Work Mortgage Loan Program and Alternative Non-QM Loan Options
Financial constraints have made The past few years tough for many potential homeowners. Due to the pandemic, people faced job losses and suffered from medical emergencies, resulting in credit scores dropping and leading to issues like bankruptcies, foreclosures, and short sales.
Who Benefited from the FHA Back to Work Mortgage Program
The FHA Back to Work Mortgage Loan program greatly benefitted from looking to reestablish homeownership. However, since this program has been terminated, there has been a surge in demand for alternative loan options, especially for non-QM (non-qualified mortgage) loans.
This updated guide further sheds light on the current situation for borrowers trying to get back on track, focusing specifically on non-QM loans as alternatives to the FHA Back to Work program.
What Is The FHA Back to Work Mortgage Program?
The Federal Housing Administration introduced the FHA Back to Work Mortgage Loan Program to assist borrowers with severe credit issues due to uncontrollable economic events such as foreclosure, bankruptcy, or short sales.
Borrowers who suffered a detrimental economic event could get an FHA loan provided they met some specific criteria with proof of hardship due to economic events such as loss of employment or income.
Along with these, there were a couple of other requirements, too. The borrower had to provide proof of timely payments on all accounts for at least the past 12 months. Completion of an approved housing counseling program was mandatory before applying.
Qualify For Non-Qm Mortgage Loans
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Non-QM Loans versus FHA Back to Work Mortgage Program
Similar to how the FHA Back to Work program expired, many lenders today offer non-QM loan options to such borrowers. Non-QM loans have become a practical solution for borrowers who do not meet the qualifications of traditional loans. Under stringent guidelines, these options provide much greater flexibility by focusing on alternate ways to measure the borrower’s ability to repay. In the following paragraphs, we will cover non-QM loans. The following is a list of popular non-QM loan programs specifically designed for people attempting to recover financially.
Non-QM Loans Following Recent Credit Trouble
Who They’re For: Within the last 5 years, borrowers have set off bankruptcies, short sales, and foreclosures.
Key Features:
- The applicant will be eligible the next day after any significant credit event.
- A higher down payment of at least 20% or above is required.
- There is slightly elevated interest compared to traditional loans in managing the risk.
Documentation Required on Non-QM Loans
It may include bank statements or asset-based qualification rather than traditional income.
Bank Statement Loans
Borrowers include those who are self-employed and have little to no structured income.
Key Features
- No tax returns are needed.
- Applicants must provide 12-24 months of bank statements as proof of income.
- Flexible credit score minimum requirements can start from 580.
- Benefits include self-employed applicants or gig economy workers with excess cash but no traditional proof of income.
Asset-Based Loans
Who They’re For: Individuals with low income but significant liquid assets.
Key Features:
- Approvals will be based on savings, retirement funds, and investment accounts with no income needed.
- Benefits include easily helping retirees or high-income individuals.
DSCR (Debt Service Coverage Ratio) loans
Who They’re For: Investors looking for the most beneficial financing to purchase rental properties.
- Important Features: A loan may be obtained based on the property’s earnings instead of the individual’s income. There are no personal DTI (debt-to-income) ratios that have to be calculated for this purpose.
- Advantages: It allows faster response and fewer barriers for investors rebuilding a financial portfolio.
A Hard Money Loan
- Who They Are For: These loans are meant for people who need quick funding or cannot qualify for other loans.
- Important Features: Shorter-term loans are given at higher rates. The loans are mainly based on the purchased asset rather than the buyer’s credit.
- Advantages: This option is better suited for people who buy property to sell later or buyers who need funds quickly.
Qualify For Non-Qm Loans With Gustan Cho Associates
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How to Qualify For Non-QM Loans, Step By Step
- Evaluating Your Finances Completing steps 1 to 3:
- Examine credit score, income, and assets owned.
- Establish the loan program that best suits your needs.
Seek for a lender Specialized in your area:
Many private lenders, as well as companies that deal with alternative financing, offer non-QM loans. Find out about the different lenders and get the best deals.
Other Documents Needed:
Depending on the type of loan, documents such as bank statements, rental property income, or asset statements may be required.
Attempt to Fix Bad Credit:
- Even considering non-QM loans, it is wise to attempt to repair one’s credit score since it can help secure a better deal.
- Ensure bills are paid on time, debts are minimized, and unpaid collections are handled.
Undoubtedly, financial setbacks can be a tough struggle to deal with. However, solutions are always available. Although the FHA Back to Work Mortgage Loan Program is no longer available, struggling borrowers are not completely out of options. Non-QM loans allow everyone to work around the different scenarios they might face. Such loans let individuals finally realize their dreams of owning a home.
Benefits of Non-QM Loans
Invest in a non-QM loan if you are trying to take charge of your finances again. Such loans allow investors to truly focus on rebuilding their future. The flexible requirements and tailored solutions ensure that there is an option to cater to every individual specific need. Invest in your future by reaching out to us today! Let’s take the first step towards your finally owning a home!
Here is the Original Version of FHA Back to Work Mortgage
What is the FHA Back to Work Mortgage Program?
HUD’ FHA Back to work extenuating circumstances due to economic event mortgage loans shortened the waiting period to one year for those who had a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. This loan program turned out to be a total flop. Gustan Cho Associates now has alternative financing called NON-QM Loans where there is no waiting period after foreclosure, deed in lieu of foreclosure, or short sale to qualify for home loans. 10% to 20% down payment is required on all non-QM loan programs. There is no private mortgage insurance required on non-QM loans and no maximum loan limits.
FHA Loan After Bankruptcy and Foreclosure Waiting Period
Typically, there is a two-year waiting period from the date of a bankruptcy discharge date to qualify for FHA loans:
- There is a three-year waiting period from the recorded date of a foreclosure or deed in lieu of foreclosure and a three-year waiting period from the date of the HUD’s settlement statement for the short sale to qualify for FHA Loans
- However, HUD launched the FHA Back to work extenuating circumstances due to an economic event on August 15, 2013
- The Back To Work program shortened the waiting period to one year for those with prior bankruptcies, foreclosures, deed in lieu of foreclosures, and short sales to qualify for FHA Home Loans
- The FHA Back to Work Mortgage Program turned out to be a flop and got discontinued
In this article, we will discuss and cover Have You Gotten Your Back To Work Mortgage Denied.
Not Too Fast! Many Are Getting Denied For FHA Back To Work Mortgage Loans
The back-to-work mortgage program turned out to be a total disaster. Only a fraction of those who applied got conditional mortgage loan approval. Only a tiny fraction of those with conditional mortgage approvals ended up closing on their loans. Never in history has a loan program turned out to be such a disaster. Many lives got ruined due to HUD’s FHA Back to Work Mortgage Program:
- The FHA Back to Work loan program was a newer type of mortgage program and they are all manually underwritten
- I have gotten FHA Back to Work loan approvals for FHA Back to Work borrowers denied by other mortgage lenders
Since FHA Back to Work loans were manually underwritten, the decision on whether or not the FHA Back to Work loan application gets approved or denied totally relies on how the file underwriter interprets the extenuating circumstances on the letter of explanations.
Underwriter Discretion on FHA Back to Work Mortgage
There are cases where the mortgage broker will just read the letter of explanation and determine that his or her FHA Back to Work mortgage loan applicant qualifies for the Back to Work extenuating circumstances mortgage loan program. The mortgage application gets submitted to underwriting, and the underwriter determines that the letter of explanation of the extenuating circumstances does not match the W-2s, tax returns, and credit report. The FHA Back to Work loan application gets denied, and the mortgage loan applicant loses the earnest money and the home purchase. There is a lot at stake with an FHA Back to Work Extenuating Circumstances due to an economic event mortgage file. I am extremely careful with qualifying an FHA Back to Work mortgage loan application.
Back To Work Mortgage Lending Guidelines
To qualify for FHA Back to Work mortgage loans, the borrower needs to have had a significant economic event of unemployment or underemployment. Borrowers needed a 20% reduction of household income for at least six months prior to the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.
- The borrower needs to have had good credit prior to the impact of the economic event
- The borrower has since recovered after the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale and have re-established credit and no late payments since the economic event
- The borrower needs to have completed a HUD-approved housing counseling course
- The mortgage application cannot be dated 30 days after the completion certificate of the housing counseling course
Home buyers who still need to meet the waiting period after a housing event and need to qualify for a mortgage with a direct lender with no mortgage overlays can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are correspondent lenders on non-QM loans and bank statement mortgage loan programs for self-employed mortgage borrowers. All of our pre-approvals are full credit loan approvals fully underwritten and signed off by our mortgage underwriters.
