Underwater Homeowners May Qualify for a Mortgage Sooner Than Expected with HUD’s Back to Work Extenuating Circumstances Program
On August 15, 2013, FHA launched the FHA Back to Work - Extenuating Circumstances program, also known as the FHA's "second chance" for mortgage applicants who have experienced financial hardship as a result of unemployment or severe reduction in income.
This program aims to help people who experienced a foreclosure, short sale, or bankruptcy due to what they consider a “negative credit event.”
In order to be eligible for this program, applicants are going to need to prove four things.
- First, they’ll need to prove that your income declined by 20 percent or more for a six month period and that those circumstances were the result of a negative credit event.
- Second, they’ll need to be able to provide documentation if the negative credit event qualifies under the “Job lost beyond applicant’s control” category. This might include publicly available information on a reduction in workforce or that a company closed. Applicants can also look to see if they had unemployment compensation.
- Next, applicants have to prove that, over the course of the last twelve months, they haven’t had any credit hiccups like a late installment or any new collections or judgments. Applicants also have to have a clean credit record for the last 12 months. So, they’ll need to show that they’ve had a positive rental history or that, if they’re living with their parents, they haven’t had any other credit issues.
- The last criteria is that applicants will have to go through Housing Counseling with an approved counselor no later than six months from the application date and no sooner than 30 days from the application date.
If you or someone you know experienced a foreclosure, short sale, or bankruptcy, they may be in a position to buy again through this new program. You can learn more by watching this video: http://www.youtube.com/watch?v=ldoWQSykQos.