FHA Back to Work Program

Exciting News! FHA Is Allowing People that Suffered through Recent Economic Hardships to Apply for a Home Loan with the FHA Back to Work Program.

photo credit: Daquella manera via photopin cc

In the not so distant past people had to wait 3 years or more after suffering through a financial hardship. Bankruptcy, foreclosures and other major financial disasters would sideline people for a number of years before they could buy a house again. However, all that has changed with the FHA Back to Work Program.

Previous Guidelines

For years the FHA program has helped people finance the purchase of a home with a modest 3.25% down payment. In general, the FHA rules for credit and employment history were more forgiving than conventional loan guidelines. However, there were strict rules about waiting a significant length of time after filing bankruptcy, losing a home to foreclosure, getting a loan modification or a deed-in-lieu.

New Guidelines

The Back to Work program waives waiting periods based on certain hardship situations. People that have suffered through the following types of problems are no longer forced to wait multiple years to apply for an FHA loan

* Bankruptcy (either Chapter 7 or Chapter 13)

* Short sale of previous home

* Foreclosure

* Modification of previous mortgage

* Sale of a home due to pre-foreclosure status

* Deed-in-lieu

Due to the recession of the past few years the government has given FHA the ability to relax their rules in order to help people qualify for home loans. Now people will only have to wait 12 months.

Meeting the New Qualifications

For borrowers that have faced a hardship like the ones described above they will need to meet a few qualifications.

First the borrower will need to prove that their current financial condition is recovered from the impact of the financial hardship.

Second, the borrower will need to provide proof that their income declined by a minimum of 20% for 6 months or longer. This can usually be shown by presenting federal tax returns and the supporting W-2 forms.

Finally the borrower will have to agree to complete a counseling session aimed at educating home buyers.

In addition to these items the borrower must re-establish their credit. This does not mean that the scores must be 700+. However, once the hardship has ended the borrower will need to have good payment history on all credit accounts in order to prove that they are able and willing to make their monthly obligations.

Types of Borrowers

The Back to Work program can be used for people buying their first home as well as people buying their second, third, fourth, etc. home. It can also be used with the FHA 203(k) program for people that wish to renovate or modernize a home. Even people that are currently in a Chapter 13 plan could be approved for the FHA back to work program. The court will have to grant permission for the loan and the borrower will have to meet the other requirements.

The recent recession has hit a lot of people and left a lasting impact on them. The Back to Work program is aimed to help these people put the past behind them and return to the stability of owning a home.

Additional Mortgage Information: Mortgage Home Loans Financing

Understanding the New Rules for Jumbo Mortgages

Understanding the New Rules for Jumbo Mortgages

It is true that mortgage rules have become stricter in the last few years.  However, getting a jumbo mortgage in Wisconsin is still a very real possibility.  Borrowers need to understand up front the basic requirements and also how to compare loans to make sure they are getting the best deal.

In the not so distant past homebuyers could get approved for a jumbo mortgage with only a 5% down payment.  In addition, there were no strict requirements for proof of income.  As long as the credit score was 700+, the loan was as good as done.  Things have changed a lot in the past 4 years, not just in Wisconsin but all over the country.  Here are the basic requirements for anyone that wishes to borrow more than the standard $417,000 amount:

• Borrower must pay 20% of the home’s purchase price as a down payment.  The money must come from their own funds, meaning it cannot be a gift.  Borrowers should be prepared to provide copies of bank statements and investment account reports to document where the down payment came from.
• Borrowers will need to provide adequate documentation that reflects their income.  This may come in the form of paystubs and W-2 forms.  For self-employed individuals, the most recent two years tax returns will be required.
• Borrowers should be prepared to look at loans with adjustable rates.  Long term fixed Jumbo loans are possible but the rates are usually significantly higher than the adjustable loan.

Current Property Values

Before buying a home it is a good idea to talk to a Realtor® to find out about trends in property values in the area.  Many places have seen declines in the past 5 years. However, recent reports show that the overall sales in Wisconsin are keeping pace with last year’s numbers.  And the drop in values seems to have hit a low point.  This means that most places like Madison should see at least stable values for the upcoming year and hopefully a rise in values in coming years.

Limits on Intended Purpose

People can only get a jumbo mortgage on a home that they intend to occupy as their primary residence.  This means that for people looking to buy a vacation home or a rental property will not be able to use a Jumbo mortgage for their purchase.

Focus on Other Debt

One of the biggest changes for approving jumbo mortgage applications is the attention given to debt-to-income ratios.  The current guideline is 38%. This number is calculated using the borrower’s gross, monthly income before taxes are deducted.  Lenders want to make certain that borrowers can comfortably afford the large house payment and still have discretionary income left over.

For those borrowers that are considering a jumbo mortgage in Wisconsin the current mortgage rate climate seems like a good fit for buyers.  Low rates along with lenders who are still pushing these loans make it a good investment for a savvy buyer who has a good handle on their finances.

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a lender directly to learn more about its mortgage products and your eligibility for such products.

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