Boomerang Buyers are able to finance again after an announcement made in August 2013 in regards to Extenuating Circumstances.
For example, residents who have in the past lost their homes resulting from loss of income or employment may now have the option to buy again as soon as 12 months after filing for bankruptcy, short sale, or worst foreclosure.
As opposed to other extenuating circumstances, the Back to Work program is actually very rare on the extenuating circumstance exceptions. However, the definition in qualifying is very specific and clear.
FHA’s Back to Work program for many is a second chance for to buy again after having to undergo such financial hardship listed within the guidelines making them eligible for this program.
Qualifying for FHA’s Back to Work Program
There are eligible economic events listed in the extenuating circumstance exception guidelines, such as:
-Loss of Income
-Loss of Employment
There are two ways you must document the reason for loss of income. One of these two ways are usually acceptable:
1.) Written Verification of Employment (VOE) with documentations of the date and the amount showing that the income has in fact dropped.
2.) Tax returns signed or W-2’s showing proof of loss income in the household.
The Extenuating Circumstances is if the loss resulted in at least a 20% drop in income or reduced income for 6 months.
For applicants with exceptional circumstances such as loss of employment must provide:
- Written Verification of Employment (VOE) confirming the date of termination.
- If loss of employment was actually due to the employer running out of business then there are a few extra requirements such as:
- Written notice of termination.
- Available public documentation of the business closing.
- Documentation of unemployment income.
With the Back to Work Program in effect now, many former homeowners are able to buy again as long as they can show evidence of on-time payments for the past 12 months proving that you have recovered from your losses. If you are able to show proof of recovery in a loss of income of 12 months after filing bankruptcy, short sale or defaulting into foreclosure then the Back to work program may be something you can definitely look into if you are considering to buy again.
Back to Work Terms and Definitions
Below are a few terms currently being used in the eligibility process of the new FHA Back to Work Program.
- Economic Event: An event that takes place and is beyond your control of the outcome resulting in loss of income or employment, and sometimes even both in which causes for a reduced income of 20% or sometimes more within the household and for a lengthy period of at least 6 months.
-Onset of an Economic Event: The Onset of an Economic Event is the month that the event took place.
-Recovery from an Economic Event: This event is when a person has restored their credit and now meets Satisfactory Credit for a minimum of 12 months. Satisfactory Credit means that a borrower’s credit history is free of late payments pertaining to housing or any installment debts, major derogatory credit issues in revolving accounts. If you have a current mortgage, it must also show a satisfactory payment history for at least 12 months.
-Borrower Household Income: The total gross income of the borrower and all members of the household must be calculated for assessing a loss of income.
-Household Member: An individual is considered a household member if they were living in the home at the time the event occurred and was also a co-borrower of the defaulted mortgage.
-Housing Counseling: Counseling from a housing counseling agency approved by HUD and should be related to homeownership and residential mortgage loans.
-Borrower: Borrowers and Co-borrower.
Keep in mind that there are a lot of documentation required for the process of this new FHA program. Feel free to give us a call at 888-672-1015 and ask a lender today on how you can get started on the new FHA Back to Work Program!