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New Federal Legislation Makes it Easier to Get a Mortgage After Bankruptcy

The Federal Housing Administration (FHA)’s new “Back to Work” lending plan shortens the waiting time required to secure a mortgage after bankruptcy or foreclosure to 12 months. FHA mortgages have always been a great option for first-time or lower-income borrowers because they require only a 3.5 percent down payment. In the past, borrowers had to wait three years after a foreclosure or two years after a bankruptcy to qualify. Now, loss of income is accepted as a qualifying event to shorten the waiting period.

To qualify for “Back to Work” mortgages, applicants must demonstrate:

  • Their foreclosure or bankruptcy was caused by external economic factors which reduced their income by 20 percent for more than six months. (Quitting a job or being fired for cause is not allowed.)
  • They have made timely rent and credit card payments for one year. Only one 30-day late payment on all non-rent accounts is permitted and no accounts can be in collection.
  • They have completed housing counseling from a Department of Housing and Urban Development approved agency.
  • If your loss of income is based on seasonal or part-time employment, you must provide W-2s, pay stubs, unemployment income receipts or other documentation showing two years of seasonal or part-time employment.

All claims must be supported by termination notices, tax returns and W-2s.  People whose Chapter 13 bankruptcy has not yet been discharged must furnish written permission from their Bankruptcy Court to apply for the loan.  

The Atlanta, GA bankruptcy attorneys at DebtStoppers are knowledgeable about FHA guaranteed loans and can help you determine if you qualify under the new regulations.  To own your own home again and begin building equity, call their office today at 404-796-7161 to schedule a free consultation.