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FHA Back to Work Program: Buying a Home after Foreclosure or Bankruptcy
The Federal Housing Administration (FHA) has announced a program that allows a borrower to buy a home sooner after foreclosure, bankruptcy, deed-in-lieu, or short-sale. This new FHA program is called The Back to Work Program. This is an extension of the current FHA Mortgage programs that exist.
Prior to this program, the minimum requirements to buy a home after bankruptcy was 2 years and buying a home after a foreclosure required 3 years. The FHA has waived this guideline allowing homebuyers to qualify for a mortgage with only 12 months after their derogatory credit issue.
Back to Work – Extenuating Circumstances due to an “Economic Event”
To qualify, the borrower must have waited a minimum of 12 months, have no new late payments or collections, take a HUD housing counseling program and be able to document that the credit issues were caused directly from loss of work or reduced income due to economic circumstances. Riverbank Finance offers FHA loan financing down to a 560 credit score which is much lower than the industry standard 640.
All other HUD requirements must be met that can be found on Mortgagee Letter 2013-26 and the HUD 4155.1 FHA Back to Work Program. For more information on this program and other loan options, request information below or call a licensed loan officer at 800-555-2098.
Michigan USDA Rural Development Loan Updates
USDA Rural Development loan processing in Michigan is starting to recover after the government shutdown. Before the shutdown the USDA was behind 6 weeks in processing Rural Development loan applications. Currently they are now only 4 weeks behind in processing loan applications. This does not mean that the USDA is picking up their processing abilities but is more a return to normal.
Initial underwriting turn times are still very quick and should be ready to send to the USDA for final approval in 2-3 weeks. Purchase agreements should be written for at least 45-60 days for Rural Development loans. A good line of communication should be kept with your loan officer to ensure a quick closing.
Conventional Loan and Fannie Mae Mortgage Updates
Recently, Fannie Mae, the government sponsored entity (GSE), has changed their underwriting guidelines. The Conventional Loan changes became effective on 11-16-2013. The main highlights of the changes are below:
- Eliminates the low 3% down payment requirement. Fannie Mae has raised the down payment requirement to 5%. A quick note though; 2% of that down payment may be gifted to the purchaser from a close friend or family member.
- Interest Only loans and 40 year fixed mortgage programs have been completely eliminated.
- ARM loans have become tougher to qualify for based on debt to income (DTI)
- No more Expanded Level approvals (EA1, EA2, EA3 etc.)
- Easier qualification guidelines on DU REFI PLUS/HARP refinance loans.
Overall, potential new homebuyers with conventional home loans will have to put more money down and may find that it is tougher to qualify for some mortgage loan products. It is always best to consult with a mortgage expert when determining which mortgage loan option may be best. Call the Riverbank Finance home loan experts today at 800-555-2098 so you know your options and if the new Fannie Mae updates affect you and your new loan. For additional information submit an inquiry below.