Understanding how FHA's Back to Work Program Works

By
Real Estate Broker/Owner with Vision Realty
https://activerain.com/droplet/45RM

                                                                 

 

Up until recently, a buyer was required to wait for three years from the date of a foreclosure or short sale and two years from the discharge of a bankruptcy to purchase a new home. But in August 2013, FHA introduced the “Back to Work” program. This program is designed to shorten the waiting period to 12 months.

 

 

If you take a moment and think about it, this program could potentially encompass a huge population. From 2010-2012, there were 9,881,908 foreclosure filings in the United States. This represents almost 10% of all potential home buyers under the age of 61. By understanding how the “back to work program” works, you may find a new home around the corner.

The basic premise is that potential buyers who have experienced an “Economic Event” may be able to buy sooner than what traditional guidelines would allow. To qualify you must be able to demonstrate that their credit impairment was a result of a loss of income and that you have re-established satisfactory credit for a minimum of 12 months.

 

 

So what qualifies as an economic event? FHA requires that the household income drop by a minimum of 20% for a period of 6 months. The onset of the economic event is the month the income was lost.  This month becomes the focal point. First, the lender must determine whether the loss of income covers at least 6 months. Secondly, the borrower’s credit must be evaluated prior to the job loss. If the borrower has credit issues that predate the economic event, then they probably will not qualify for back to work.

 

 

Once it has been determined that the borrower’s job loss and prior credit meet FHA guidelines, then it is necessary to make sure that they have re-established satisfactory credit for the last 12 months. FHA will allow the borrower to use non-traditional credit to meet this guideline.

 

Base upon these requirements, it should be clear that the lender is going to need a great deal more information than normal. Because this is a niche program, lenders will be extremely cautious in their underwriting. Lenders will require the borrower to provide written evidence of when they were terminated. The lender will also require the buyer to document income before and after the economic event. Since most people struggle to stay solvent by using their savings and juggling debts, the loss of income may not immediately result in foreclosure or bankruptcy.  Consequently, the lender may need to examine tax information from 4 or 5 years back.

 

 

While not everybody who has had a foreclosure will qualify for “Back to Work”. However, it does open the door for many hard working families whose current credit history is not indicative of their willingness to pay their bills on time.

                                                  

 

 

Posted by

columbus, lewis center and gahanna real estate

Columbus Ohio real estate - Vision RealtyAs a certified Realtor® for the top-rated Columbus Realty Firm - Vision Realty, with 32 years of dedicated real estate experience, I can help buyers, sellers, investors, short sale sellers and more find, sell or invest in the right property, at the right price, at the right time. Contact me anytime for updates and information on the Columbus OH Real Estate market.

 

Donald Payne - Vision Realty, Inc.
4608 North High Street

Columbus, OH 43214

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Rain Silverhawk 10/23/2013 10:58 PM
  2. Marte Cliff 10/24/2013 02:47 AM
  3. Michael Dagner 10/24/2013 04:02 PM
  4. Winston Heverly 01/15/2014 10:53 PM
Topic:
Real Estate General Information
Location:
Ohio Franklin County
Groups:
Realtors®
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Advice for Buyers
Tags:
credit history
vision realty
donald payne
buying home after foreclosure
andy deutschle
fha back to work

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Rainer
146,052
Andrew Payne Realtor® Richmond VA Homes For Sale~804-938-5257~
Coach House Realty - Richmond, VA
Richmond, VA, Real Estate, SRES®, NAR Green

Knowing about this program is very helpful.  It's always a good idea to be aware of basic FHA requirements.  Thanks for sharing!

Oct 24, 2013 12:09 AM #40
Rainer
288,671
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

Donald, as a lender I have started exactly 11 evaluations of this criteria. Only one qualifies based upon the documentation they have provided. Sure we as a lender offer and can fund this mortgage but do not get the potential buyers hopes up because they interpret the guidelines in their narrow way.

Oct 24, 2013 12:20 AM #41
Rainmaker
647,685
Team Honeycutt
Allen Tate - Concord, NC

This FHA "Back to Work" program sounds as though it will benefit some of the people who need help the most.  I am happy to see this program available.

Betty

Oct 24, 2013 12:48 AM #42
Rainmaker
656,967
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

Thank you - I hadn't heard anything about this. Have a great week!

Oct 24, 2013 01:23 AM #43
Rainmaker
180,777
Karen Steed
Tallapoosa, Bremen, Waco, Buchanan, Temple, Carrollton - Tallapoosa, GA
Associate Broker Haralson Realty

Thanks Donald for the great info on the Back to Work Program!

But, (there is always a big but)  since it is such niche product, will there be many lenders who will be willing/able to do this loan? 

I will hope for the best, but is seems as if, in this environment, most government programs end up causing more problems than they solve. 

Will there be so many requirements, no one can qualify?

Or will this lead to a more healing in the market place?

I am going to contact my favorite lenders today, and see if they can do this loan yet.  There may be buyers who qualify!

Oct 24, 2013 01:45 AM #44
Rainmaker
1,431,497
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I think in general this is a good idea.  Of course what the government gives with one hand they take back with the other.  The new lender rules will make it harder for anyone to get a loan.

Oct 24, 2013 01:46 AM #45
Rainer
116,418
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

Great post and I see it as a huge potential and it will bring 10 Mil. potential clients back into the mix.  That could be huge for the economy and our industry.  Housing truly leads the economy and hopefully this will really help the economy get going.

Oct 24, 2013 02:11 AM #46
Rainer
349,821
Raymond Denton
Homesmart / Evergreen Realty - Dana Point, CA
Capo Beach Realtor® - www.CapistranoBeachHomes.com

I'm hoping the program helps lots of families.

Oct 24, 2013 02:12 AM #47
Rainmaker
1,566,083
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Thanks for sharing this. I'm going to go find a few more details on the guidelines so I can write about it for my Texas Mortgage lender client. 

Oct 24, 2013 02:37 AM #48
Anonymous
Stephanie Batzel

Great info, thank you!!

Oct 24, 2013 03:58 AM #49
Rainmaker
808,351
Lanre-"THE REAL ESTATE FARMER" Folayan
Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

Donald I got to talk to some of my lenders about this so hopefully I can share this information with some people who I know this program would benefit them. Thanks.

Oct 24, 2013 09:20 AM #50
Rainer
321,244
Jimmy Faulkner
Florida. Homes Realty & Mortgage - Wantagh, NY
The Best Of St. Augustine

I do hope the program is real and not just a political baloon ready to pop. It has all the earmarks of being a great benefit to those who need the help the most and I do hope it is sincere.

Oct 24, 2013 10:41 AM #51
Anonymous
Donna Cook

I knew this program was coming..can't wait to get the word out to..

This is going to bring in a whole new pool of buyers. So excited about this program!

Oct 24, 2013 11:02 AM #52
Rainmaker
267,297
Dan Derito
Success! Real Estate - Brockton, MA

The guidelines are pretty tight but, at least it's a start. 

Oct 24, 2013 11:10 AM #53
Rainmaker
689,306
Michael Dagner
Brokers Guild Classic - Denver, CO
Your Denver Homes Realty Expert

A huge step in the right direction with this.  Thanks, Donald.

Oct 24, 2013 03:57 PM #54
Rainmaker
848,657
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Donald, we think this is a great program, just hope banks get on it quickly.

Oct 26, 2013 03:31 AM #55
Rainmaker
153,944
Kathy Opatka
RE/MAX CROSSROADS - Ocean City, MD
Serving Ocean City, MD, & The Delaware Beaches
Interesting! I hope that the FHA rules aren't so difficult that no one qualifies to use them!
Oct 27, 2013 12:52 AM #56
Rainer
7,458
Brian Ward
Lakewood Ranch, FL

Great info. Thanks.

Nov 13, 2013 12:06 AM #57
Rainmaker
1,730,985
Sam Miller
RE/MAX Stars Realty - Howard, OH
Knox County Ohio Real Estate Specialist

Don, I have a feeling this program is going to be very helpful because of the shift in the market that took place between 2007 and 2011.

Dec 05, 2013 05:37 AM #58
Rainmaker
2,043,453
Joe Jackson
Keller Williams Capital Partners Realty - Columbus, OH
Clintonville and Central Ohio Real Estate Expert
ille and Central Ohio Real Estate Expert

It's the weekend and cold in Columbus so I Will be on active rain

Feb 27, 2015 06:08 PM #59
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