FHA Back to Work Mortgage Program

The Department of Housing and Urban Development (HUD) through the Federal Housing Administration (FHA) through its Back to Work Program allows borrowers  seeking to purchase a home after going through a foreclosure, short sale or deed in lieu, and bankruptcy. Eligible borrowers may now qualify for an FHA loan in as little as 12 months, opposed to the previous 24-36 month required waiting period.

This program is specifically designed for borrowers who could no longer afford their mortgage payments due to an “extenuating circumstance,” such as a job loss or a 20% (or more) loss in income for a period of at least 6 months prior to the foreclosure, short sale or bankruptcy. Even borrowers who went through both a bankruptcy and foreclosure may qualify as long as they’ve fully recovered from the “economic event.”

FHA is allowing for the consideration of borrowers who have experienced an “Economic Event” and can document that certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control. To document the 20 percent loss of income, you must provide two years tax returns and W-2s prior to the foreclosure or short sale, or a Verification of Employment (VOE) showing proof of your previous earnings. You may also be able to use past pay stubs, unemployment benefits or income receipts to documents the loss. Again, to qualify as an economic hardship you must have lost at least 20 percent (or more) in income for a period of 6 months.

The borrower must demonstrate a full recovery from the event by showing a good history of satisfactory credit for at least 12 consecutive months which includes no history of delinquency on rental housing payments; and no more than one thirty (30) days delinquency on payments due to other creditors; and no collection accounts/court records reporting (other than medical and/or identity theft).

Other than the qualifications listed above, prospective borrowers will be required to complete a mortgage counseling session with a HUD-approved counselor at least 30 days prior to submitting a loan application. The session will address the borrower’s economic event (loss of income or job loss) and upon completion a certificate will be sent to the borrower. This can be done in person, over the phone or right here online – we’ve found that it typically costs about $60 for the counseling session and the certificate will be good for at least 6 months. Any borrower who does not secure a mortgage within the 6 months period may be required to complete an additional counseling session.

You can apply for this new program with almost any FHA-approved mortgage lender. Make sure to work with a loan officer or lender who has experience with this program to avoid any unnecessary delays in the process. Keep in mind that FHA loan limits (in high-cost areas) are set to decrease from $729,750 to $625,500 starting January 1, 2014.

Please note that you still must meet all FHA guidelines in order to be qualified such as meeting the minimum credit score of at least 580 to 620, making a small down payment of at least 3% minimum, and in some cases down to a 500 credit score with a 10% down payment. Borrowers will also need to document their income by W-2 or federal tax returns. You can find out more about FHA loan and guidelines at this link.

Regardless if you went through a short sale or ended up losing your home to foreclosure, the FHA Back to Work mortgage porgram is the quickest way back into homeownership.
Here is some more information below for those of you who still have some question about this program.

How can I prove a successful credit history since the time of my economic distress?

Part of the Back to Work Program approval process is for the lender to review your credit report, just like all other mortgage borrowers have to endure. All forms of delinquent and current debt will be reviewed. If you can show your lender that you had decent credit prior to your economic distress, that any decline in credit occurred because of the financial distress and that you have had a perfect payment history for the past 12 months, then you should be in good condition. Minor delinquencies are allowed on revolving accounts.

What if someone else in my household did not have a 20% reduction in their income?

It’s important to note that the household income defines as the income of two spouses living together (or the income of both the owners of the property). If only one of you had endured loss of income and the other did not, this could disqualify you if the household income as a whole did not endure a 20% reduction. This will make you ineligible for the program.

Is the 3 year waiting period for a foreclosure, short sale and deed-in-lieu really done away with?

Yes, if you qualify for this program then you will not have to wait three years to get another FHA loan.

Is the 2 year waiting period for bankruptcy really waived as well?

Yes, qualified borrowers no longer have to wait 2 years to receive an FHA loan after filing either Chapter 7 or 13 Bankruptcy.

Do I need judicial permission to get an FHA mortgage if I am still in Chapter 13 Bankruptcy?

Yes, if the bankruptcy has not yet been discharged, you must provide written permission to enter into the program through the Bankruptcy Court.

What does my credit score have to be to qualify for the FHA Back to Work Program?

The program itself doesn’t necessarily have a minimum credit score. The standards that the program follows are the ones of the actual FHA mortgage program.

Can first-time home buyers use this program?


Can repeat home buyers use this program?


Can I receive a FHA 203k construction loan under this program?

Yes, as long as you meet all the requirements for the loan.




Are existing modified mortgages eligible for the FHA Back to Work Program?


Are loans on payment plans eligible for the Program?


Does unemployment through a shutdown business qualify me for the program?

Yes if you were unemployed due to a business shutting down you can be eligible for the program. You will need to provide a written termination notice or publicly available information regarding the company that went out of business to qualify.

Can unemployment income receipts be used to document a period of income reduction?


Does the FHA Back to Work Program have an expiration date?

Yes, the FHA will terminate the program on September 30, 2016.

How do I apply for the FHA Back to Work Program?

All you have to do is go to an FHA approved lender and ask for an application. The approval process for the loan itself will be the same as if you hadn’t gone through a financial hardship.

If you have any questions about the above mortgage programs, or if you need help in getting a new home loan, please call me, Erik Sandstrom any time at 1-800-779-4547; or email me at [email protected] (NMLS# 805941)

Erik Sandstrom

Erik Sandstrom

Loan Officer

If you have any questions about the above mortgage programs, or if you need help in getting a new home loan, please call me, Erik Sandstrom any time at 1-800-779-4547; or email me at [email protected] (NMLS# 805941)

Erik Sandstrom

Erik Sandstrom

Loan Officer

If you have any questions about the above mortgage programs, or if you need help in getting a new home loan, please call me, Erik Sandstrom any time at 1-800-779-4547; or email me at [email protected] (NMLS# 805941)