Qualifying for a new home loan after foreclosure

People in New York who have declared bankruptcy or had a foreclosure may be able to qualify for a new home loan under a federal program called ‘Back to Work – Extenuating Circumstances.” Introduced in 2013, the Federal Housing Administration initiative is designed to help those who have gone through a financial hardship and would otherwise not be able to qualify for a new home loan.

There are some requirements that applicants must meet in order to qualify for an FHA home loan. First of all, the financial hardship that caused the foreclosure, deed-in-lieu of foreclosure, short sale or bankruptcy must have been out of the applicant’s control. The financial hardship might have been caused by an uncontrollable event that resulted in a family’s income dropping significantly, such as an unexpected layoff or medical expense.

In addition to providing documentation about a qualifying financial hardship, a person who would like to secure a loan under the FHA program must be able to show that they have reestablished their credit. Reestablishing credit means that the applicant has paid their rent payments on time for at least 12 months and that there has only been one delinquency lasting no longer than 30 days on a non-housing loan payment. Further, applicants must complete HUD-approved housing counseling before they can qualify for an FHA home loan.

A lawyer may be able to help clients to apply for the Back to Work program so that they can qualify for a new home loan. After evaluating their unique circumstances, a lawyer may help them to develop a plan for reestablishing their credit. A lawyer may also assist in gathering all of the appropriate documentation in order to prove that a qualifying financial hardship led to their home foreclosure or bankruptcy.