Differences Of The FHA Back to Work Versus Other Loan Programs

This Article Is About FHA Back to Work Versus Other Loan Programs
With traditional loans such a government loans and Conventional Loans, there is a mandatory waiting period after a Chapter 7 or Chapter 13 Bankruptcy discharged date to qualify for a mortgage loan. Buying a home is often a significant financial decision, particularly for those recovering from economic setbacks. The FHA Back to Work program was designed to make homeownership more accessible for individuals facing financial recovery. This article examines the differences between this program and other loan options, highlighting its distinctive benefits.

What is the FHA Back to Work Program?

The Federal Housing Administration (FHA) introduced the Back to Work program to help borrowers recover after significant financial hardship. This initiative aims to shorten the waiting period for eligible individuals to qualify for an FHA loan, allowing them to purchase homes just one year after foreclosure, bankruptcy, or short sale. Speak With Our Loan Officer for FHA Back to Work Mortgage Loans

Key Differences: FHA Back to Work vs. Other Loan Programs

Reduced Waiting Period:
FHA Back to Work: Shortens the typical waiting period to 12 months following foreclosure, short sale, or bankruptcy. It requires proof of economic hardship and recovery.
Conventional Loans: Usually require waiting periods of 4-7 years after a financial setback, which makes this option less favorable for buyers seeking to re-enter the housing market quickly.
Credit Requirements:
FHA Back to Work: Credit score requirements are generally lower than those for conventional loans, making it suitable for borrowers with less-than-perfect credit. However, lenders may still impose their specific criteria.
Conventional Loans: Typically, they require higher credit scores and place more emphasis on comprehensive credit history.
Down Payment:
FHA Back to Work: Requires a minimum down payment of 3.5%, making it attractive to buyers with limited savings.
Conventional Loans generally require higher down payments, often around 5% to 20% of the home price, depending on the lender.
Mortgage Insurance:
FHA Back to Work: If the down payment is less than 10%, Mortgage Insurance Premiums (MIP) are mandatory and last for the life of the loan. This protects lenders but increases the cost for borrowers.
Conventional Loans: Private Mortgage Insurance (PMI) is required for down payments below 20% but can be canceled when equity reaches 20%, reducing overall costs.
Housing Counseling:
FHA Back to Work: Borrowers must complete housing counseling from a HUD-approved agency at least 30 days before applying. This step aims to educate potential buyers on homeownership and financial management.
Conventional Loans: Do not require formal housing counseling as part of the application process.
Debt-to-Income Ratio:
FHA Back to Work: Offers more flexibility with higher debt-to-income ratios, enabling borrowers to qualify even with significant existing debt.
Conventional Loans: Generally require lower debt-to-income ratios, which can be restrictive for borrowers.

Waiting Period Guidelines On Government And Conventional Loans

The current waiting period for a home buyer with a prior bankruptcy is two years from the discharge date of their Chapter 7 bankruptcy to qualify for an FHA Loan.

The current waiting period for a home buyer to qualify for an FHA Loan who had a deed in lieu of foreclosure or foreclosure is three years from the recorded date of the foreclosure or deed in lieu of foreclosure
FHA borrowers one year into a Chapter 13 Bankruptcy can qualify for an FHA loan as long as they have made 12 months of timely payments to their creditors
There is no waiting period to qualify for an FHA Loan after a Chapter 13 Bankruptcy discharged date
All borrowers who had a Chapter 13 Bankruptcy discharge need to be manually underwritten if their Chapter 13 Bankruptcy has not been seasoned for two years which requires rental verification
There is a three year waiting period from the date of a short sale for a home buyer to qualify for an FHA loan
HUD implemented the FHA Back To Work Extenuating Circumstances due to an economic event FHA Loan Program which shortens the waiting period to one year after a bankruptcy or foreclosure
The FHA Back to Work Extenuating Circumstances due to an economic event mortgage program turned out to be a major flop and a losing proposition which really stressed out many FHA Borrowers
The FHA Back to Work was supposed to give homebuyers who were forced into bankruptcy
The borrower was forced to bankruptcy due to being out of work
If this is the case, there is a chance to qualify for an FHA loan one year after bankruptcy or foreclosure

Most lenders found a way of not doing the loan than helping these borrowers get loan approval. Click here to apply for conventional loans

The Reduction Of The Mandatory Waiting Period After Bankruptcy And/Or A Housing Event

There are differences between the FHA Back to Work Versus Other Loan Programs where FHA Back to Work Versus Other Loan Programs was supposed to offer a reduced waiting period after bankruptcy and foreclosure.

HUD has created the FHA Back to Work Extenuating Circumstances mortgage program back in August for those homebuyers who fell victim to the real estate, financial, banking, and credit meltdown
The FHA Back to Work Extenuating Circumstances mortgage loan program was supposed to shorten the waiting period for those who had a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale to a one-year waiting period
However, it does come with rules and strict guidelines in order to qualify and this program turned out to be a major mess
Now there are better programs than the FHA Back to Work Versus Other Loan Programs
NON-QM Loans do not require any waiting period after bankruptcy or foreclosure

Gustan Cho Associates can close NON-QM Loans in 21 days or less.

Qualification And Guidelines Of FHA Back to Work Versus Other Loan Programs

All FHA Back to Work Versus Other Loan Programs is done via manual underwrites.

You need to be able to locate a mortgage lender that does manual underwrites
The lender need to welcome FHA Back to Work Extenuating Circumstances mortgage loans
This is now is very difficult to find
This is because the FHA Back To Work Extenuating Circumstances turned out to be a total nightmare
Nobody hardly does them anymore
I have started processing FHA Back to Work Extenuating Circumstances mortgage loans in full force
Gustan Cho Associates are one of the lucky ones that got them done but it was like pulling teeth
If you want to know whether you qualify for the FHA Back to Work Versus Other Loan Programs, I would love to be able to help you and can tell you whether you are eligible or not

However, I strongly recommend the NON-QM Loan program that Gustan Cho Associates offers than the FHA Back to Work Mortgage Program.

FHA Back to Work Versus Other Loan Programs: Eligibility Requirements And Guidelines

Here are the basic eligibility requirements for the FHA Back To Work Program:

Be able to document and prove that the cause of the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale was the result of a job loss or loss of 20% of total household income for at least six months prior to the homeowner filing for bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
A detailed letter of explanation along with supporting documents is required
Please email a detailed letter of explanation to gcho@gustancho.com
You are welcomed to contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response if you have any questions

Apply online at www.gustancho.com by clicking the APPLY NOW icon on the top right of this website.

Qualifying For A Mortgage With A Lender With No Lender Overlays

I will then review your mortgage application and run a credit check and review your mortgage application, letter of explanation, and your credit report/scores with an underwriter:

If your mortgage file seems doable by the mortgage underwriter, we then proceed to the next level
You need to complete a one-hour HUD-approved housing counseling
Your mortgage application cannot be started until 30 days from the completion of your HUD-approved housing counseling
While we are waiting for the 30 days waiting period after completion of your HUD counseling, I will request mortgage documents that will be needed such as two years tax returns, 2 years W2s, 60 days bank statements, recent paycheck stubs, and other required documents
Once we have passed the 30 days waiting period, I will issue you a pre-approval so you can start shopping for your new home.
Once you get a home you like to purchase, sign the real estate purchase contract and submit it to me for processing and underwriting
FHA Back to Work Extenuating Circumstances loan programs is expected to take between 30 days to 45 days to close upon the loan officer receiving the signed mortgage loan application as well as the required documents
Please contact us at Gustan Cho Associates if you are interested in the FHA Back to Work Extenuating Circumstances mortgage loan program

Again, the FHA Back To Work Program is not a loan program that I would recommend and if you are a borrower who is adamant in trying to go for it, I would suggest a TBD Underwrite. Qualifying for a mortgage with a lender with no lender overlays

Frequently Asked Questions (FAQs)

What is the FHA Back to Work Program?
The FHA Back to Work Program is designed to assist borrowers who have experienced financial hardship resulting in foreclosure, bankruptcy, or short sale. It enables them to become eligible for an FHA loan sooner by reducing the waiting period to just one year.
How is the waiting period different from other loan programs?
Traditional FHA loans generally require a 2-3 year waiting period after foreclosure or short sale and up to 2 years after bankruptcy. Conventional loans often require even longer waiting periods. The FHA Back to Work program shortens the waiting period to 12 months.
Who qualifies for the Back to Work Program?
To qualify, borrowers must demonstrate that their financial hardship was due to an “economic event” such as unemployment or loss of income that reduced household earnings by at least 20% for at least six months. They also need to show that they’ve fully recovered from this event.
What are the unique features of the Back to Work Program compared to other FHA loans?
It includes a mandatory housing counseling requirement. Borrowers must complete counseling from a HUD-approved agency 30 days before applying, a feature unique to the Back to Work program.
Does this program offer any benefits other than a shorter waiting period?
The program provides the standard FHA benefits, such as lower down payments (as low as 3.5%), higher debt-to-income ratio flexibility, and more lenient credit score requirements.
How does the Back to Work Program differ from conventional loans?
Conventional loans often have stricter qualification criteria, requiring higher credit scores and longer waiting periods after financial setbacks. They also lack mandatory housing counseling.
Is private mortgage insurance (PMI) required for FHA Back to Work loans?
Yes, mortgage insurance premiums (MIP) are required for FHA loans. Unlike PMI for conventional loans, MIP lasts for the entire loan life, depending on the down payment.
Can I refinance my Back to Work loan into a conventional mortgage?
If you qualify for a conventional mortgage with improved credit and finances, refinancing from an FHA loan can help eliminate MIP and lower your interest rate.
Are there specific requirements for income and employment?
Yes, applicants must show stable employment and income, typically for at least one year, to demonstrate financial recovery from the hardship event.
How can I apply for the FHA Back to Work program?
Contact an FHA-approved lender to discuss your eligibility and start the application process. The lender will guide you through the necessary documentation and assist you with the mandatory housing counseling requirement.

GCA Mortgage Group are experts when it comes to FHA back to work loan programs. If you need further assistance, you can contact us at 800-900-8569 or text us for a faster response. You can also email us at alex@gustancho.com. Our expert Loan Officers are available even during weekends and holidays!