FHA Back To Work Mortgage

HUD has launched the FHA Back to Work extenuating circumstances due to an economic event mortgage loan program which shortens the waiting period for those with a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale from the traditional two years after a bankruptcy and three years after a foreclosure and/or deed in lieu of foreclosure to a one year waiting period last August 15, 2013.  The FHA Back to Work mortgage loan program is not for everyone and there are strict guidelines that a candidate must qualify for.  First and foremost, in order to qualify for the FHA Back to Work extenuating circumstances due to an economic event mortgage loan program, the mortgage loan applicant needs to have been laid off or terminated from his employer for at least six or more months and had a reduction of 20% of his or her household income and due to this economic event the result was the initiation and completion of the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.  The mortgage loan applicant needed to have had good credit and a timely payment history with no late payments until the economic event.  The mortgage applicant credit scores suffering during the economic event is fully understandable and their credit scores taking a plunge during the unemployment and/or underemployment period is expected.  The mortgage loan applicant needs to show that he or she has gained full employment and has fully recovered and has re-established their credit whether via secured credit cards or other forms of credit is expected.  No late payments are allowed after the mortgage applicant has fully recovered from their economic event.  Mortgage loan underwriters want to see a gradual increase in the mortgage applicant’s credit scores, which is natural with re-establishing their credit after the economic event.

Letter Of Explanation

If you feel you qualify for the new FHA Back to Work Extenuating Circumstances due to an economic event mortgage loan program, those mortgage lenders participating in the Back to Work mortgage program will first want to see a detailed letter of explanation accompanied by documents supporting what you stated.  Your letter of explanation will be what will determine whether your mortgage lender will proceed in approving you in a Back to Work mortgage loan or deny you.  Your letter of explanation should be carefully thought through and carefully written in a well organized manner where it is easy to understand.  It should not be too long.  Two to three pages maximum.  Here is an outline on how your letter of explanation on a FHA Back to Work mortgage loan program should be formatted.

1.  State the reason why you were out of work.  If it was because your company was downsizing, write that on your letter of explanation and provide providing documentation such as news letters from the company, letter of termination, or other supporting facts.  Remember that you need to have been laid off and/or terminated from your employer in order to qualify for the FHA Back to Work Extenuating Circumstances due to an economic event mortgage loan program.  If you have voluntarily quit because you heard rumors that your company was going to start laying people off, you WILL NOT QUALIFY for the Back to Work mortgage loan program.

2.  Provide total 5 years of W-2s and tax returns to show that decline in income and the re-establishing of yourself.

3.  Explain your economic event, whether you were forced into bankruptcy, foreclosure, deed in lieu of foreclosure, short sale or any combination as well as the necessary paperwork:  All pages of bankruptcy documents, foreclosure paperwork, deed in lieu of foreclosure paperwork, or HUD settlement statement from short sale.

4.  Explain your current situation with your new job and financial situation.

Your mortgage broker will go over the letter of explanation with you and tell you whether the letter of explanation is detailed enough.  Your mortgage broker will probably then have one of the Back to Work mortgage loan underwriters take a look at it and see whether your deal is doable or not.  If it is doable, you need to take a HUD approved housing course and upon completion have the housing counselor issue you a certificate of completion signed and dated by the counselor.  There is a 30 day waiting period after the housing course in order to formally apply for the FHA Back to Work Extenuating Circumstances mortgage loan.

Gustan Cho

www.gustancho.com

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.

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