FHA recognizes that as a result of recent recession, many borrowers who experienced unemployment or other severe reductions in income were unable to make their mortgage payments and lost their homes.
The hardship faced by this particular category of borrowers may not truly reflect their ability to repay a mortgage, so a second chance was given.
- Credit impairments were the result of a loss of employment or loss of household income beyond your control: the “economic event”.
- You have fully recovered from the event.
- You have completed housing counseling.
The onset of the economic event is determined by the month in which the loss of employment / employment income occurred.
The economic event can be used if:
- It lasted at least 6 months
- Resulted in a 20% or more reduction in your income – the household prior income will have to be verified (an occupant co-borrower will be counted as well, while a non-occupant one will be disregarded).
All delinquent accounts and indications of derogatory credit will be analyzed and documented to determine that the occurrence was a result of the borrower’s “economic event”, and not an inability to mange debt/general disregard for managing financial obligations.
Chapter 7 bankruptcies: must have been discharged 12 months prior to loan application.
Chapter 13 bankruptcies: must have been discharged prior to loan application, and all required bankruptcy payments made on time, with a 12month history to show. If the bankruptcy was not discharged prior to the loan application, borrower must obtain written permission from the bankruptcy court to proceed with a mortgage transaction.
Foreclosure: minimum 12 months must have passed. If the foreclosure was an FHA loan, 12 months must have elapsed since the FHA paid the initial claim to the lender.
Short sale/Pre-foreclosure sale: 12 months must have elapsed since the date of the sale.
Credit Lates: no late housing payments or installment/revolving debt payments within the most recent 12 months (excluding medical collections).
Housing counseling must be obtained from a HUD approved housing counseling agency.
* FHA Back To Work loan program counseling must be completed a minimum of thirty (30) days, but no more than six (6) months prior to loan application date
Besides these requirements, everything else about this loan program is identical to the regular Utah FHA mortgage loan