Back in August of 2013 we wrote Buying Today Despite Short Sale Yesterday, which addressed the fact that those who were victims of a recent short sale (less than two years ago) could possibly obtain a mortgage for purchase or refinance, provided certain elements existed. The elements for success included: 1. No other credit issues, 2. Solid equity/down payment of 30% or more, 3. Solid reserve funds and 4. solid income. That program has been extremely effective, especially for non-conforming loans; in fact, an existing client is pre-approved for a $2.5mm purchase and the foreclosure occurred only two years ago!
Now, Housing and Urban Development (HUD) has stepped up their game with a similar program, the Federal Housing Administration (FHA) Back to Work Program. In short, if a borrower lost their home over 12 months ago due to financial hardship and she/he have re-established credit (or maintained otherwise good credit), then they may qualify to get a new mortgage to purchase a home without the standard two to seven year waiting periods required under conventional mortgage programs. A financial hardship is defined as a loss in income of 20% or more for at least a 6-month period and it must be documented. The borrower must also document that she/he has fully recovered from the hardship. Finally, the borrower(s) must attend a credit counseling class prior to submitting an application. All other FHA requirements apply as well, but the rates are extremely competitive and help to stretch the qualifications of applicable borrowers.