Did you sell your home in a short sale or lose it in a foreclosure? In the past, you would usually be required to wait three years before being allowed to buy a primary residence with an FHA fixed-rate mortgage. That all changed with the FHA Back to Work Program, which lets homebuyers make a home purchase one year following a short sale, foreclosure, bankruptcy, or deed in lieu of foreclosure.
The program has been extended through Sept. 30, 2016. In order to qualify, you’ll need to prove that the loss of your home was due to hardship that was beyond your control.
The Federal Housing Administration will require that you meet their loan requirements, are able to document the financial problems that stemmed from financial hardship, have re-established a good credit history, and that you have completed housing counseling approved by HUD.
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First, a lender must decide whether you meet the FHA loan requirements. You’ll be asked to show how the financial hardship was out of your control and how it lowered your income or caused you to lose your job. The FHA says you may qualify for assistance if your household income dropped by 20% or more for at least six months.
Note that adjustable-rate loan recasting, previous loan modifications, not being able to rent out an income property, or divorce will not qualify as a suitable reason. Also know that you will be required to take a “Pre-Purchase Counseling” course with a HUD approved housing counseling agency 30 days before you start the application. A counselor will review your debt load, ability to afford the mortgage, and go over the mortgage insurance and the loan application process.