The FHA Back to Work Program

So you recently filed for bankruptcy or had a foreclosure, and now you want to buy a home.

With the FHA Back to Work Program you can get a mortgage loan just 12 months after a bankruptcy, foreclosure, or short sale.

This article will take a look at the FHA back-to-work program, how it works, and who is eligible.

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What is the FHA Back to Work Program?

HUD created the FHA back to work program to help consumers buy a home who had an unforeseen financial hardship but have since got back on their feet.

The waiting period for borrowers with a bankruptcy, foreclosure, or short sale is 36 months for FHA and conventional loans.

The Back to Work program reduces the waiting period from 36 months to just 24 months. You must show there were extenuating circumstances that led to the economic event, such as a reduction in income or a loss of a job.

Who is Eligible

To qualify, you must have had extenuating circumstances that caused your financial hardship. A loss of a job, household income by at least 25%, or medical reasons.

If one of the first three statements and all of the last three statements below apply to you, you may qualify.

  • Loss of income (25%+ reduction in household income)
  • Laid off or fired
  • Medical condition or disability
  • Re-established positive payment history
  • Have recovered from the economic event
  • Are financially stable


You will need to have re-established a positive payment history since the economic event. This means that you have timely payments on any credit account and no derogatory items on your report. Any open credit or loan accounts must show no late payments for the past 12 months.

If you have a mortgage, you must be able to show 12 months of on time payments.

You may be eligible if you have gone through these Economic events:

  • Chapter 7 or 13 bankruptcy
  • Short Sales
  • Pre-foreclosure
  • Foreclosure
  • Short sales
  • Deed-in-lieu
  • Loan modifications
  • Forbearance agreement


Extenuating Circumstances Program

HUD created the FHA Back to Work program because they understand if there were extenuating circumstances that lead to a bankruptcy, or foreclosure you may have recovered. By reducing the waiting period for buyers who qualify, more consumers can become homeowners.

Here is an example of a situation that qualifies for the Back to Work program and what the lender is looking for.

John is an accountant, has been at the same company for several years, making good money. One day John is told he is being laid off. He cannot find a new job quickly and falls behind on all of his payment obligations, including his mortgage. He is forced to file for bankruptcy because he cannot afford to pay. Shortly after the bankruptcy, he finds a new accounting position with good pay.

He can get current on his mortgage, and he gets a secured credit card to help re-establish positive payment history. A year later, John apples for a mortgage. He can prove he was laid off, and that is why he filed for bankruptcy.

John’s mortgage payments and credit card payments have all been on time for the last year. He is a perfect candidate for the Back-to-Work Program.

What are FHA Loans?

The Federal Housing Administration was created to help more Americans become homeowners. The FHA guarantees home loans that are offered by FHA-approved lenders allowing them to lower their loan requirements and offer mortgages to more borrowers.

FHA loans have the lowest credit score requirements of any mortgage and require just a 3.5% down payment with a 580 credit score or higher.

FHA Loans for People with Bad Credit

The FHA will insure a mortgage when a borrower has a 500-579 credit score with 10% down. However, closing on a mortgage with a credit score in this range is very difficult. It is highly recommended to work on improving your credit score before applying for a mortgage.

If you have at least a 580 credit score and just a 3.5% down payment, you can qualify for an FHA mortgage. The odds of being approved with a 580 credit score are higher than if you have a score under 580.

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