FHA Back To Work Mortgage Loan

FHA Back To Work Mortgage Versus NON-QM Mortgages

The United States Department of Housing and Urban Development, also known as HUD, has launched the new FHA Back To Work Mortgage where it shortens the waiting period to one year after a bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale.

  • The traditional waiting period to qualify for a residential mortgage loan after a bankruptcy is two years from the discharge date of the bankruptcy. 
  • There is a three year waiting period after a foreclosure, deed in lieu of foreclosure, and/or short sale to qualify for a FHA insured mortgage loan.  
  • This  mortgage loan program is a manual underwrite mortgage loan program that has strict mortgage lending guidelines and it is not for everyone. 
  • Mortgage loan applicants need to qualify for this one year after a bankruptcy and/or foreclosure mortgage program. 
  • Many mortgage lenders who are participating are still in the learning phase and are extremely careful to make sure that the mortgage applicants fall within the guidelines set forth by HUD and FHA. 
  • Remember that all of these applications are manual underwrites and the mortgage loan underwriter need to follow the Mortgagee Letter from HUD and there are many underwriter’s discretion issues. 
  • Just because one underwriter denies a mortgage application does not mean another underwriter will deny it. 
  • I had half a dozen cases where I got denied from one mortgage lender but got it approved by a different underwriter from a different mortgage lender.

Case Scenario Where One Lender Denies Back To Work And Another Lender Approves

Here is the guidelines that HUD requires for borrowers to qualify for FHA Back To Work Mortgage  :

  • To qualify the mortgage loan applicant needed to have been either laid off from his or her job .
  • Or, the company needed to have shut down causing a forced unemployment or underemployment and due to the unemployment.
  • The mortgage loan applicant was forced to either file bankruptcy, have a foreclosure, deed in lieu of foreclosure, or short sale due to at least a 20% reduction in his or her household income for at least six months.
  •   A voluntary resignation or quitting a job WILL  DISQUALIFY a mortgage loan applicant. 
  • A divorce and reduction of income will not qualify a mortgage loan applicant either. 
  • A self employed person whose business went out of business due to the economy will not qualify because HUD views a failed business as a calculated risk. 
  • The only way a mortgage loan applicant will qualify is only if they have been terminated from their employer and proof of involuntary termination is required.

Cases Scenario On FHA Back To Work Mortgage

A recent case scenario of a loan I just closed for a mortgage loan borrower is when the first wholesale mortgage lender I took the file to denied the mortgage applicant because the mortgage applicant lost his job due to the employer not extending his employment contract.  The Back to Work mortgage underwriter did not view this as an involuntary termination.  I disagreed with the underwriter’s decision but the underwriter will not budge and stayed firm with his denial.  I then took the file to a different wholesale mortgage lender and that underwriter agreed that my client’s not getting an employment contract renewed and this being the cause of his unemployment qualified him for the Back to Work extenuating circumstances due to an economic event mortgage loan.  The mortgage loan applicant eventually got his mortgage application approved and we ended up closing on the loan.  Again, just because one mortgage underwriter does not feel that an applicant does not meet the mortgage lending guidelines of the Back to Work Mortgage program does not mean a different underwriter will not approve the loan.

Credit Guidelines

A loan applicant’s credit report and credit history will be scrutinized by the mortgage loan underwriter.  The mortgage loan applicant is expected to have had perfect credit prior to his or her unemployment.  Late payments prior to his or her unemployment will definitely disqualify the Back to Work mortgage loan applicant.  Once the mortgage applicant became unemployed, late payments and bad credit is expected and a credit score drop is also expected.  However, once the FHA Back to Work Mortgage loan applicant gets a new job, the mortgage loan underwriter expects the applicant to have no more late payments and re-established credit.  One late payment after the mortgage loan applicant re-establishes themselves can be a deal breaker.

Housing Counseling

A HUD approved housing counseling course needs to be completed for all mortgage loan applicants for this program and they cannot apply for an official mortgage loan application until 30 days after the signed completion date of the housing certificate.

2017 Update In Qualifying For Mortgage After Bankruptcy And Foreclosure

The FHA Back To Work Mortgage program was a complete disaster. Only a fraction of borrowers who applied for this loan program were successful and got a clear to close and closed on their home loans. An alternative to this loan program is NON-QM Loans. The Gustan Cho Team at CrossCountry Mortgage offers NON-QM Loans where there are no waiting period after bankruptcy or housing event such as foreclosures, deed in lieu, and short sale. Depending on the borrower’s credit scores, a 10% to 20% down payment may be required and mortgage rates is normally higher than FHA Loans but it can be a great alternative for home buyers who have not met the waiting period after bankruptcy and foreclosure.


The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.


  1. Humberto Bermudez says:

    More information about this program