The waiting period for homeowners who have been foreclosed on or gone through a financial hardship to re-apply for an FHA loan just got a little shorter.
A new rule change from the Federal Housing Administration via a program called Back to Work – Extenuating Circumstance has reduced the period that these borrowers are required to wait to apply for a new home loan from three years to 12 months. (The waiting period for a conventional loan is 7 years.) The borrower must prove that the reason for the foreclosure or financial hardship was due to job loss or significant drop in income. In addition to showing current income that will support the new mortgage, the borrower must provide evidence of an excellent credit record since the foreclosure and is required to undergo “housing counseling” with a HUD-approved counselor.
While this could be good news for some, it could be hard to find a lender willing to issue a loan. Under the program, the FHA loan must be manually underwritten which means that the lender will have to buy it back in the event that the borrower defaults. In virtually all other cases, FHA loans are guaranteed by the federal government.
The program is the latest effort by the Obama administration to aid those who lost their homes to foreclosure and other events in the most recent housing crisis. For additional details, click here.
This article originally published at http://dc.urbanturf.com/articles/blog/for_the_foreclosed_a_shorter_waiting_period/7505
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