As a Mortgage Broker located in San Diego, I know how the recent recession and current economic stagnation caused a lot of people in San Diego to lose their homes.
It cause many people to get caught and mired in extenuating financial difficulties.
For many San Diegans, things have begun to improve.
You might be recovering financially and once again thinking about buying a home and if you could qualify for a San Diego Mortgage.
The big question you’re asking yourself is whether you can do something now or have to wait a certain period of time.
If you’ve haven’t heard about it or don’t know much about it, there is a new program out there to help and it’s called FHA’s “Back to Work”.
It could be just the thing to help you get approved to buy a home to replace the one you lost, or if you’re a first-time San Diego home buyer.
Introduction to the New FHA “Back to Work” Program
On August 13, 2013 the FHA (Federal Housing Administration) initiated the “Back to Work – Extenuating Circumstances Program.”
The program was set-up to relax mortgage borrowing “guidelines” for any borrower who has “experienced financial difficulties due to extenuating circumstances.”
The program’s purpose is to allow individuals who meet the new FHA guidelines for the “Back to Work” program the ability to get approved for FHA Loans under certain conditions and for specified situations.
The program is designed as a “second chance” for prospective mortgage applicants who have experienced a degree of financial hardship because they became unemployed or had their pay severely reduced.
Who Qualifies for FHA Back to Work Program?
Individuals who qualify for this program are those who have experienced negative credit situations over which they had no control.
The FHA recognizes that the current economic situation does properly recognize your ability or willingness to pay for a mortgage, and is a means to help those individuals secure FHA loans.
You may qualify for this program if you have experienced the following economic hardships:
- Pre-foreclosure sales
- Short sales
- Loan modification
- Chapter 7 bankruptcy or Chapter 13 bankruptcy
- Forbearance agreements
To qualify, you must be able to meet several minimum eligibility standards.
The first criterion you must satisfy is that you must have experienced an “economic event” such as those listed above.
The second criterion that you must satisfy is that you need show you have achieved a full recovery from the event.
The third criterion you must satisfy is to agree to a “total housing counselling” session before you close your loan.
And finally, you must provide proof that the income of your household was reduced by 20% or more for a period of at least 6 months as a result of the “economic event”.
If you’re looking for more information on San Diego FHA Loans, or other low down payment options it helps to use a San Diego Lender who can assist and advise you through the entire loan process.
If you would like to get an interest rate quote on the “Back to Work” program CLICK HERE. If you need more information or have additional questions, please call me at 619 – 312 – 0612.
What Are the Benefits of FHA Back To Work Program?
There are several significant ways the “Back to Work Program” can benefit you. The following are the some of the most important benefits:
- You can use the program as a first-time buyer.
- You can use the program as a repeat home buyer.
- You no longer need to wait three years to apply for an FHA loan after experiencing a foreclosure, short sale or deed-in-lieu.
- You no longer need to wait two years to apply for FHA loans after experiencing a Chapter 7 or Chapter 13 bankruptcy.
What Documentation is Required for FHA Back to Work Program?
Needless to say, you will be required to provide some evidence in the form of documents in order to qualify for FHA loans with the “Back to Work” program.
The 2 main areas which will require you to submit documentation include:
- Proof that your household sustained a 20% loss of income in total
- Proof that your credit history has been satisfactory since the “economic event”
Documentation Required Showing 20% Loss of Household Income
You should know that the loss of household income applies to everyone in your household. The overall impact of the loss of income must be equivalent to a loss of 20% income for the entire household in total.
Documentation consists of the following:
- Federal Income Tax Return’s or W 2’s, or
- Written Verification of Employment showing income prior to the economic loss
- Seasonal and part-time workers must show 2 years of income in the same field of employment
As an experienced mortgage broker, I can advise you on the best form of documentation that you should submit.
Documentation Required to Show Satisfactory Credit History
Your credit history will be reviewed by your broker or lender as they guide you through the FHA “Back to Work” application. To qualify, the FHA is looking to see that you had a good history prior to the “economic event” and that your credit difficulties occurred as a result of the “economic event.”
Finally, they also want to see that you have re-established an excellent re-payment history on all your major credit accounts for a period of 12 months after your have recovered. Some allowances may be made on minor delinquencies on “revolving accounts.”
Common Questions About the FHA “Back to Work” Program
Some of the more common questions you might have could include the following:
How do I apply for the FHA “Back to Work” Program?
The mortgage broker or lender must be an FHA-approved lender. You must follow the same step as you would for a regular FHA-insured mortgage loan.
Will mortgage rates be different under this program?
Because we are Mortgage Brokers , we work with many different lenders. Each lender may price this program differently. We do have some that offer the same rates as regular FHA loans depending on credit score.
What if my current lender does not participate in the program?
You will have to find a lender that does participate in the program such as myself.
Are there limits on the size of the FHA program loan?
This will depend on the lender. Many lenders are only offering this program up to a loan amount of $417,000, while others in San Diego may go up to $697,500.
When can I buy a home after a foreclosure, a short sale, or deed –in-lieu of foreclosure?
You can buy a home 12 months after a foreclosure, a short sale or deed-in-lieu of foreclosure.
How soon until I can buy a home after Chapter 7 or Chapter 13 bankruptcy?
You can buy a home 12 months after filing for Chapter 7 or Chapter 13 bankruptcy.
What do I need to Know about housing counselling?
You are required to attend housing counselling to qualify. The session will last 1 hour and you do not have to attend in person as long as you take the housing counselling session by phone or online.
You should also know that by taking this housing counselling you will not necessarily automatically qualify for the FHA “back to Work Program” as you must still be approved under FHA guidelines.
When does the FHA “Back To Work” End?
The FHA “Back To Work – Extenuating Circumstances program” will end on September 30, 2016.
Basic review of FHA loans
FHA loans allow individuals with credit scores as low as 600 to buy a home with a minimum down payment of 3.5%. They are also ideal for borrowers who have a higher debt to income ratios. The FHA program in San Diego currently has a maximum loan amount of $697,500.
There are many other benefits to an FHA loan. The whole 3.5% down payment can be gifted to the buyer by relatives. FHA loans also allow non-occupying co-borrowers to help with qualifying. The seller is also allowed to pay up to 6% of the purchase price to cover the buyer’s closing costs.
Interest rates on FHA loans in San Diego are about .125% – .25% better than conventional loans.
All FHA loans have 2 mortgage insurance charges which include:
- MIP (Mortgage Insurance Premium) which is equivalent to 1.75% of the loan at closing and is generally tacked onto the loan.
- An annual mortgage premium which is generally paid on a monthly basis and may vary depending on the amount of the loan, and the LTV. This is usually 1.35% but can be as high as 1.55%.
Over the years, I have helped many clients buy homes using FHA financing. I would be happy to help you utilize this new program to get into a home.
To get you started right away, you can CLICK HERE to get pre-approved.
Or if you have questions on the FHA “Back to Work Program” or need some advice on any San Diego home loans, then give me a call at 619 – 312 – 0612 and I will help you now!