If you or someone you know were one of the thousands of home owners who were forced to foreclose, short sale or even declare bankruptcy due to extenuating circumstances caused by the recent recession, you may not have to wait any longer to buy a home of your own.
On August 15th FHA sent out Mortgagee Letter 2013-26 that outlined new underwriting guidelines for the "Back to Work - Extenuating Circumstances" program to help get more Americans back into homeownership. This is basically a temporary modification of current underwriting procedures benefiting individuals and families that have experienced credit issues due to an "Economic Event" and can document that:
1. Certain economic impairments were the result of a loss of employment or a significant loss of household income beyond the borrowers control
2. The borrower has demonstrated full recovery from the event; and
3. The borrower has completed housing counseling.
What this all really means is that you may be able to now qualify for a new FHA purchase loan even if you had to short sale your home, or lost a home to foreclosure, or had to file a bankruptcy in the last three years. Previous to this enhancement to the guidelines, this would not have been possible even with extenuating circumstances.
Previously the waiting period for a bankruptcy was a minimum of 2 years, and a short sale or foreclosure was a minimum of 3 years. What’s best yet, is that this program does not require a ton of additional red tape or additional applications. Nor will there be any add on's to your interest rate.
Being that this is more of a temporary change to some of the underwriting guidelines and not a whole new program, you will get the same terms as someone that had never found themselves in economic circumstances beyond their control causing credit issues.