FHA Back to Work Program
What is the FHA Back to Work Program?
The FHA back to work program is a special FHA home loan that helps borrowers with a financial hardship by reducing how long you need to wait to get an FHA Loan after you file for bankruptcy, have a foreclosure or a short sale.
The program will reduce the waiting periods for the following credit events:
- Chapter 7 bankruptcy
- Chapter 13 bankruptcy
- Short Sale
Without the FHA back to work program, you would likely need a subprime mortgage to purchase your home if you had a recent bankruptcy or foreclosure.
FHA Waiting Period After Credit Events
These are the waiting period requirements for a traditional FHA Loan:
- Chapter 13 Bankruptcy – No discharge needed but 12 on time mortgage payments must be made before getting your next FHA loan
- Chapter 7 Bankruptcy – 2 years after discharge, you can get an FHA loan
- Foreclosure – 3 years after discharge, you can get an FHA loan
- Short Sale – 3 years after discharge, you can get an FHA loan
The FHA Back to work program will help to reduce the time referenced above so you can get an FHA loan sooner.
When Does the FHA Waiting Period Begin?
For both a chapter 7 and chapter 13 bankruptcy, the clock starts ticking at the discharge or dismissal date.
Chapter 13 – If you are working on a payment plan to get yourself back to financial stability, your waiting period will be shorter (12 months) than if you are unable to complete your chapter 13 plan.
How Does the FHA Back to Work Program Work?
The FHA back to work program is for individuals who had a recent financial setback which resulted in their inability to make ends meet. This setback would have harmed the consumer’s credit which resulted in the bankruptcy, foreclosure, or short sale.
If the borrower can meet the requirements below, then the waiting time after the credit event would be shortened to 1 year.
The borrower would need to meet ONE of three of these four to be eligible:
- Loss of income of at least 20%
- Fired or laid off from your job
- Medical condition or disability
- Natural disaster
The borrower must also meet ALL of these to be eligible:
- Currently financially stable
- Recovered from the credit or economic event
- Have established a positive payment history
- Attend a short homeowner counseling program
Additional Back to Work Program Requirements
- The loss of income needed to be out of your control
- The foreclosure or bankruptcy must have been due to the income loss
- The foreclosure or bankruptcy needed to have happened at least 12 months ago
- You are able to document your income with last 2 years W2s plus recent pay stubs
- Perfect credit over the past 12 months with only one 30 day late payment (non mortgage)
- All collections paid
- You are back to work with enough income to qualify
- You completed the HUD counseling.
You must be able to document the hardship that you encountered. The FHA loan will need to be manually underwritten and your file will be carefully reviewed.
FHA Back to Work Program Example
This is an example of how the FHA Back to Work Program can help someone. Keep in mind that this is just one example and your personal scenario would need to be examined by an underwriter.
Dennis is a finance manager for a medium sized company on the east coast. The company decides to move their corporate office to the west coast and as a result, Dennis loses his job. While he is looking for a new job, he falls behind on his payments and eventually has to file for bankruptcy. Soon after, Dennis finds a new job as a finance manager and re-establishes his credit.
In this situation, Dennis can apply for an exception under the FHA Back to Work Program if he can show that the company move resulted in his job loss and his financial hardship.
What are the FHA Back to Work Mortgage Rates?
The mortgage rates for an FHA back to work program are the same as with any other FHA mortgage. There is no increase in the rate simply because you have had a recent bankruptcy, foreclosure or short sale. However, if these credit events negatively impacted your credit scores, then it will also result in a slightly higher rate.
All lenders use many factors in determining what the interest rates are and credit scores for an FHA loan are the most critical. This would be the case with all lenders and with every type of FHA loan program.
Can I get an FHA Loan with Bad Credit?
As mentioned above, a recent credit event such as a bankruptcy will likely negatively effect your credit scores. First, you should immediately work on improving your credit as you prepare to apply for the FHA back to work program. You learned from this article that you will need to wait at least a year and that you must establish a positive payment history and begin to get yourself back on track. Take this process seriously so that you can improve your credit scores.
If you are unable to boost your scores at least into the mid 600’s, there is still help for you. We have lenders who offer FHA loans for bad credit even with credit scores as low as 500. Read this article on bad credit FHA loans to learn more about how you can qualify.
If you believe that you may be eligible for the FHA Back to Work Program, then click to connect with an FHA lender who can help
The FHA back to work program is a great way to shorten the waiting period after a credit event such as a bankruptcy or foreclosure to qualify for an FHA loan. If you are able to show that you had a financial hardship outside of your control, then you can benefit from this program. There are FHA lenders who will help even if you have a credit score as low as 500. Owning a home can be a reality and the FHA lenders in our network can help.
Update July 2019 – The FHA Back to Work program has been discontinued. However, our lenders can still help you if you had had a recent credit event such as a bankruptcy or foreclosure. Depending upon your credit score, you may need to have a 20% down payment for a subprime loan program. Please feel comfortable contacting us and we will help!