Distressed buyers go after a second chance
A lot of people lost their homes to foreclosure or short sale in the last few years. If these people can show that a job loss, or reduction in income, was responsible for losing the home, they can apply sooner for an FHA-insured mortgage.
The FHA previously required a three-year wait after the foreclosure to apply for a new loan. The FHA now makes exceptions, shortening the wait time to one year for borrowers who lost their jobs or income, and whose credit was tainted as a result.
"It's not one of those programs where everyone qualifies, but it's a really good program for people who lost their jobs because of the economy," says Scott Schang, manager for Broadview Mortgage Katella in Orange, Calif.
To qualify for the program, borrowers must present documentation showing they lost at least 20 percent of their income for six months and that they were able to get back on their feet and pay their bills on time for at least one year, he says.
"You absolutely have to have all your documentation, including unemployment benefit documents (and) bank statements showing the income loss," he says.
There's no shortage of buyers interested in the program, but they should make sure they really are financially prepared to own a home again before applying for the loan, says Ed Conarchy, mortgage planner for Cherry Creek Mortgage in Gurnee, Ill.
"Just because you can do something, it doesn't mean you should," he says.