Homebuyers who lost their homes because of recession-induced employment cuts may be able to return to the housing market sooner than they previously thought.
The Federal Housing Administration (FHA) recently added economic events to its list of extenuating circumstances and reduced the waiting period between foreclosure and loan qualification from 36 months to 12 months. "This will help consumers who went through housing hell — a foreclosure or short sale —
to become homeowners again and take advantage of low interest rates and
decent home prices in many parts of the country," said Richard Simpson
,MLO of Perpetual Financial consumer education.
FHA Loans Work
The FHA, part of
the U.S. Department of Housing and Urban Development (HUD), insures mortgages to allow lenders to give borrowers affordable loans, by way of easy credit qualifications, reduced down payments or lower closing costs.
To apply for an FHA loan under the shortened timeline, borrowers must meet certain criteria: The borrower must have experienced a period of six months or longer during which household income was reduced by at least a 20%, as
a result of job loss or pay cuts beyond the borrower's control; re-established his or her credit for at least a year; and completed housing counseling.
How to Qualify for an FHA Loan
Richard Simpson Mortgage Loan Officer of Perpetual Financial Group, Inc. said he is already starting to work with homebuyers who may qualify. For the past three months" I can't tell you right now how many people I had to turn
away over the last year, year-and-a-half, two years," Simpson said. "'Sorry, you had a foreclosure in the last 36 months, can't do it.' Now I'm going to be making all these calls saying,
'Hey Mr. and Mrs. Jones, guess what — the guidelines have changed.'"
Meeting the borrower criteria requires many steps of documenting your income and Simpson recommends potential homebuyers reach out to lenders with experience in FHA loans so the process goes as smoothly as
possible. For instance, a borrower must complete the mandatory housing counseling at least 30 days and no more than six months in advance of applying for a loan. That's something to consider before the house hunt commences
It's also crucial for consumers to check their progress in repairing their damaged credit. Re-established credit, according to the FHA letter, means a history clear of late housing payments, debt payments or issues on
revolving accounts, and any current mortgages must show a year of timely payments.The timing of
this program may be a huge opportunity for some who thought they couldn't buy a home for a few more years.
"Now's the time for those who really can afford to own a home to do so, before we see interest rates and housing prices climb," Simpson said. "These loans can help turn renters into homeowners, which in turn helps stabilize neighborhoods and communities."
Mortgage Loan Officer
Perpetual Financial Group, Inc.
Lender License# 17706 NMLS# 136261