Home Loan With Bad Credit: Back To Work Mortgage
We have written many blogs about getting a home loan with bad credit. HUD’s new FHA Back to Work mortgage program is a special program that enables a borrower get a home loan with bad credit. FHA Back to Work mortgage loan program shortens the waiting period after a bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale to one year waiting period. Traditional waiting periods are 2 years after a bankruptcy discharge, three years from the recorded date or sheriff’s sale date of foreclosure or deed in lieu of foreclosure, or three years after the date of the HUD’s settlement date of the short sale. However, HUD’s FHA Back to Work Extenuating Circumstances due to an economic event has strict mortgage underwriting guidelines since it is a manual underwrite. It is a great program for those who need a home loan with bad credit, especially first time home buyers. First time home buyers who had a prior bankruptcy and have their credit re-established can now get an opportunity to participate in HUD’s FHA Back to Work mortgage program after one year of their discharge date of their bankruptcy.
General Qualification Requirements For Back To Work Mortgage
For those seeking a home loan with bad credit or first time home buyers who had a prior bankruptcy, the Back to Work mortgage program has strict mortgage lending guidelines. The mortgage loan borrower needs to have been unemployed or underemployed six months prior to filing bankruptcy, or the initiation of the foreclosure, deed in lieu of foreclosure, or short sale and a 20% reduction of their household income. Proof needs to be provided via W-2s and tax returns. A Back to Work Mortgage loan applicant cannot have resigned or voluntarily quit their jobs. They need to have been terminated, laid off, or the business had to be gone out of business. A voluntary termination will automatically disqualify the mortgage loan applicant from qualifying for FHA Back to Work Extenuating Circumstances due to an economic event. For example, if you quit your job because a member of your family was ill and you had the 20% reduction of your household income, this will not qualify you for the Back to Work Extenuating Circumstances due to an economic event mortgage program because you voluntarily left your job even though the reason you left was due to medical illness of your family member. Reduction of income due to a divorce will also not be a qualifier for the Back to Work mortgage program even though half the income is reduced due the other spouse leaving.
Credit History Analysis: Back To Work Mortgage
Back to work mortgage program is an excellent program for those seeking a home loan with bad credit. However, the mortgage loan borrower’s credit history will be scrutinized and analyze. The credit history background check is one of the biggest reasons why Back to Work mortgage loan applicants get their loans denied. Even though you meet all of HUD’s FHA Back to Work Extenuating Circumstances due to an economic event mortgage lending guidelines, your credit history needs to be the following:
1. Your credit payment history will be reviewed: You must have had good credit an a timely payment history prior to your loss of employment or underemployment.
2. Your credit will drop because of your bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. Maybe your credit scores will plummet 100 plus points.
3. After your bankruptcy, foreclosure, deed in lieu of foreclosure, and/or short sale, you cannot have any late payments and you need re-established credit where your credit report will reflect an increase of your credit scores. Even if you get no new credit or re-established credit, your credit scores will increase as your bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale ages over time.
Timely Payment History Up To Date Of Economic Event
If you had a credit history of not paying your bills on time prior to your economic event, you will not qualify for HUD’s FHA Back to Work Extenuating Circumstances due to an economic event mortgage program.
If you are a mortgage loan borrower or first time home buyer that need a home loan with bad credit in Illinois, Florida, Wisconsin, California, or Indiana, please contact me at 262-716-8151 or at www.gustancho.com .
By Gustan Cho