Home > Mortgages > The FHA Back to Work Program and The Best Mortgage Resources for Homeowners

Comments 30 Comments

Not too long ago, homeowners who experienced bad luck and lost their homes due to financial troubles beyond their control had a reasonable method to fast track their re-entry into the real estate market.

Today, a consumer who sells his or her home in a short sale or loses it in a foreclosure would have to wait 36 months to purchase a primary residence again with a Federal Housing Administration (FHA) fixed-rate mortgage. However, the FHA Back to Work Program used to allow a buyer to purchase a primary home just 12 months after a foreclosure, short sale, or a deed in lieu of foreclosure.

    Call now for a FREE consultation
    CALL 844-639-6956

    The program — announced in 2013 and extended through Sept. 30, 2016 — aimed to fulfill a lofty goal: offering families a second chance at homeownership. The only sticking point required applicants to specifically document the financial problems that caused them to forfeit their prior home in order to qualify.

    In recent years, with the effects of the Great Recession waning and the housing market recovering, the underlying need for the program has become less severe, and the end of the FHA Back to Work Program means that less homeowners require special assistance.

    However, the program’s conclusion provides a great example of how loan regulations can be adjusted to help families weather extraordinary circumstances. While the FHA Back to Work Program ended, several helpful programs remain in place to help homeowners qualify for second chance home loans.

    Read on to learn how the FHA Back to Work Program worked, why it was so effective, and what alternative programs are currently available. Credit.com has offers many resources to help homebuyers evaluate their potential purchases — from free credit reports to mortgage and debt-to-income calculators. With our help, you can feel confident in your financial future.

    First Things First: Check Your Credit Before Buying a Home

    If you’re thinking about or planning to buy a house, the first thing you should do is check your credit score and pull a report. You’ll want to ensure there are no errors on your report and if there are, you’ll want to dispute them before putting an offer down. These errors are likely impacting your credit score.

    For a lender to approve your application and offer you the best mortgage rates, it’s always best to have a high credit score. If you have time to rebuild your score and feel it will increase your chances of getting a better mortgage rate, you can take steps to improve your score.

    If you don’t have to time to rebuild your credit score before buying a house, you can consider refinancing your home loan in order to get your loan approved. However, refinancing may not save you as much as you think so be sure to look at the term details before making the decision.

    Difference Between FHA and Regular Bank Loan

    The Federal Housing Administration was created in 1934 to help consumers qualify for loans during the Great Depression, when foreclosures and defaults were common. An FHA loan is insured by the FHA in order to entice lenders to provide loans to homebuyers with less-than-perfect credit.

    A conventional loan, on the other hand, is not guaranteed by any entity other than the borrower and is subject to stricter requirements — and often a larger down payment.

    According to Zillow, there are several qualifications borrowers must meet to qualify for an FHA loan, including:

    • Having 3.5% for a down payment
    • Being gainfully and steadily employed
    • Possessing a Social Security card, legal residency, and being of legal age to sign a mortgage which is typically 18 years old but varies depending on the state
    • Holding a credit score of 580 or higher

    Qualifications for the FHA Back to Work Program

    In order to qualify for the FHA Back to Work Program, you needed to show that the loss of your previous home was truly due to circumstances beyond your control. Unfortunately, the program did not consider previous loan modifications, adjustable-rate loan recasting, inability to rent a previous income property, or even divorce to be sufficient enough reasons to qualify.

    Loss of Income

    You needed to show a 20% loss of income or more for at least six consecutive months leading up to the event to qualify. For example, if the previous foreclosure, short sale, or deed in lieu happened due to loss of income, you would have met the requirement if your pre-event income was $100,000 and dropped to $80,000 or lower for six consecutive months beforehand.

    How you supported your claim: The lender with whom you applied would have ordered a verification of employment. The verification of employment would support the dates of when the loss of income occurred. Other supporting documentation would include lower year-to-date earnings with pay stubs within the dates your income dropped. W-2s and/or tax returns that show lower reported wages for that time frame would also meet the FHA requirement.

    Full Recovery With Satisfactory Credit

    The FHA wanted you to demonstrate that you were back on both of your feet. You needed to show that since the previous financial calamity, you re-established your income and paid your other obligations as agreed.

    How you supported your claim: You needed a credit score of at least 640 or to have gone through a HUD-approved counseling agency related to homeownership and residential mortgage loans.

    Tip: A 12-month favorable credit history on your other debt obligations would support the credit score requirement.

    Missing the FHA Second-Chance Boat

    These FHA requirements drew a clear line in the sand by asking for specific related documentation that led to the loss of the home. If a buyer who had a foreclosure, short sale, or deed in lieu of foreclosure was unable to provide a clear, documented 20% loss of income for six consecutive months leading up to the event, it was difficult for them to qualify for this program. Here’s why:

    The nature of lending in today’s credit environment involves revealing all aspects of the borrower’s credit, debt, income, and assets. A simple letter of explanation detailing the events that led to the loss of income is simply not enough; for this program, supporting documentation was needed to corroborate your story.

    Post-Foreclosure Timelines

    If the short sale, foreclosure, or deed in lieu of foreclosure took place within the last 12 to 36 months … Then a documentable loss of income of 20% or more for six months remained in effect.

    If the short sale, foreclosure, or deed in lieu of foreclosure took place 36 months ago or longer …Then the previous loss of income documentation threshold does not apply, and a borrower would be eligible for a new FHA loan, as long as the credit, debt, income, and assets are acceptable with the lender. A previous house loss does not automatically preclude your ability to qualify.

    If the short sale, foreclosure or deed in lieu of foreclosure took place 36 months ago or longer …

    Then the lending requirements for other types of loans are as follows:

    • Conventional loan—You’re eligible with 20% down (to avoid private mortgage insurance) seven years after the event, or three years after with documentable extenuating circumstances and a lender exception;
    • VA loan—six months out from the date of the event;
    • USDA loan—36 months out from the date of the event;
    • Jumbo mortgage (this is for loan amounts that exceed the maximum loan limit for a conventional loan in your area)—most lenders require seven years from a foreclosure or a deed in lieu; for a short sale they want 30% down and 36 months out or longer.

    Your credit scores will most definitely have taken a hit after you lose your home. However, you can still get to work on rebuilding your credit and establishing a good payment history on your other debts. You can start by checking your free annual credit reports and your credit scores. Then, you can look into credit cards for rebuilding your credit. There are also many programs that allow you to monitor your credit scores for free, including Credit.com, which also gives you an analysis of your credit, and can help you create a plan to get your credit back on track.

    More on Mortgages and Homebuying:

    Image: BrianAJackson

      Call now for a FREE consultation
      CALL 844-639-6955

      Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

      Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

      • Jamie Redmond

        Trying to get a loan 1 year after bankruptcy, credit scores are good and debit is low. Is there anything we can do to get a mortgage?

      • Jeanine Skowronski

        You may want to consult a bankruptcy attorney to determine your best recourse.

        Thank you,


        • Gas Bucket

          Worthless answer. Obviously that’s what someone is going to do. The reason people ask questions in online comments is to gain information and an expectation in the interim while waiting to do so.

      • Mona

        We had a Chapter 7 BK discharged in Aug of 2013, mostly because of medical bills as I fell ill with MS and lost my job, and my husband lost his job as well since he had to stay home and take care of me. He is now back to work and I am doing much better so with my disability income, our combined income is pretty good. When we did the BK, we did not reaffirm our home, however, we continued to live in it and we are still living in the home right now. The mortgage is current but we are about $10k upside down, we owe $150k and the house is worth about $140k, so not too bad, but still we would not break even if we sold. We also had a condo that we did a short sale on right before we filed our BK. We have 2% interest rate on this house and a $650 PITI payment so we can rent it for about $900 a month and use it as rental property and income if we wanted to keep it. Would we qualify for this program since we did have the short sale on the condo and we are not legally liable for the house we are currently living in?

        • Jeanine Skowronski

          You may want to consult a consumer attorney to see what your best recourse may be.

          Thank you,


      • Sam C

        I have a ch 7 bankruptcy discharged in 2011 and our home was foreclosed on in 2014. I was unemployed from 2011 – 2014, when I was able to obtain my current part time job. During 2013/2014 I attended college, paid for through a program for veterans disabled (VRAP). My questions are: 1) Am I bound to the 20% loss of income rule, even though I was unemployed from Feb 2011 ~ Sep 2014? 2) Will providing tax returns satisfy the docs requirement?

      • Cyndi

        I heard about this FHA back to work program via internet on FHA website. I filed for Chapter 7 over a year ago and I have my discharged papers. In order for me to qualify I would have had a loss of home ownership either foreclosure or short sale as well as filing for Chapter 7. Then I would have to show proof on loss income of about 20% within a six month time frame? I meet all the criteria except for loss of property, do I still qualify for this program?

        • Mizcyndeebee

          I would like to know the answer to this question. Because I fit the criteria except I did not lose a house, in 2009 I did a short sale, and in 2014 I filed for bankruptcy due to loss of income of more than 20%. Now I have recovered my income and still am rebuilding my credit score. I want to know if I qualify for this program too?

      • Vicki

        Coming off Chapter 7, and always current on mortgage and equity, and vehicle loan that I reaffirmed. Would like to sell my home to live near family. Do I have to wait 2years before I can move even though I’ve paid my bills? Understand that I have to have a minimum credit score of 640. I filed due to my loss of income after my husband passed.

        • http://www.Credit.com/ Gerri Detweiler

          Are you asking whether you can buy another home though you recently filed for bankruptcy? If so this article may help: How Soon Can I Buy a House After Bankruptcy or Foreclosure?

        • ScottSheldonLoans

          On this specific program if you can materially document and show on paper a specific loss of income for six months or longer that directly resulted in the bankruptcy then you would be eligible on a case-by-case basis.

      • Michele

        We are in the same boat as a lot of people from our experience over the past several years. We had our own business and rather than continue to pay for warehouse space we built a detached garage at our home. We financed it through a refinance on our home (BIG MISTAKE….hind sight is 20/20). When the economy took a dive, so did our business. I went to work part time while my husband continued to try to keep the business afloat and look for other employment. Long story short, business went under and so did we. BOA wouldn’t even discuss modification until my husband had income. It took him 18 months to find employment making 1/3 less and had to travel an hour.our discharge of bankruptcy was May 2010, but the foreclosure wasn’t filed by BOA and then they sold our loan to Nationstar. We finally did a Deed in Lieu of Foreclosure that was finalized in Feb 2015. After renting for 3 years, We bought a home in Feb 2013 (at a very High interest Only rate) through a Private Mortgage company but it is a Bridge loan that is expiring in Feb 2016. Because we already purchased in this way, would we qualify for REFINANCE or does it have to be purchase?

        • http://www.Credit.com/ Gerri Detweiler

          Michele – Scott is on vacation this week and unable to respond to your question. However there is some good information about the program here — http://backtoworkprogram.org/ — and it sounds like you can talk with a housing counselor to find out if you may qualify. Hope that helps!

        • ScottSheldonLoans

          You could more than likely refinance in February 2016. The guidelines for this program are pretty rigid and specific in a sense that you must have a documentable loss of income supported with tax returns and/or pay stubs or W-2s. The reason why I’m suggesting February 2016 that would earmark three years from the trustee sale date. I would recommend contacting County records in your area and get a copy of the trustee sale date deed. Three years from the date identified on that document is when you would be eligible for FHA financing.

      • Renee

        My bankruptcy was discharged March 2012 and included my home. I did this due to over 12 months at a 68% reduction in income (I have all the documentation). The bank bought the home at foreclosure in February 2015. My credit score is recovering from below 500 to 680 and my income has rebounded significantly. I would like to purchase a home sometime next year (2016), but cannot determine when my “seasoning” starts with the bankruptcy/foreclosure. Am I on track for the FHA Back to Work Program and how much longer do I have to wait? Does the FHA Back to Program end next year? I have $75k+ for a down payment ($100k by next year) but wondered how long I have to wait. Sure hope I’m on target!

        • http://www.Credit.com/ Gerri Detweiler

          Renee – Scott Sheldon is out this week and unavailable to answer your question. In the meantime, have you checked with a lender to see what options they suggest?

      • Loveable MsBeauti

        Okay I filed chapter 7 it was final dec 2014 I want to buy a house so are ypu saying I can’t after two years. ? Even if I’m married qill my husband be able to get it

        • ScottSheldonLoans

          If the bk was separate (meaning only he filed and discharged) and you are working with a conventional loan, then yes the bk should not be an issue.

      • Michael Ensminger (mike)

        What if you filed bankruptcy but didn’t include your house and sold the house after the discharge and still have VA eligibility?

        • http://www.Credit.com/ Gerri Detweiler
        • ScottSheldonLoans

          Mike, great question! It’s two years from the chapter 7 bankruptcy discharge date to be eligible. If you filed, but did not actually go through with the bankruptcy you would need to provide supporting documentation to your lender validating that the bankruptcy was never actually discharged and then it would be a case by case basis 2 years or under.

          • Michael Ensminger (mike)

            The bankrupcy was discharged on my bills but not the house. Due to not filing the house I was hoping that would be differant on getting a loan for a new house.
            The house was paid in full (sold) after the backrupcy was discharged.

      • joe

        I would first check the guideline requirements for FHA approved lenders. I think there is a cap on the fees and things they can charge.

        • ScottSheldonLoans

          This program does usually contains slightly higher rates and fees, but is completely FHA compliant in terms of high costs.

      • Tony

        Just found out that the Back to work program isn’t really very helpful. Out foreclosure action started in 2007.. It took the bank 6 years to actually close the case. We were not fighting it.. totally their delays. THe foreclosure is already off our credit report yet we went thru 3 months of loan processing all to find out that we aren’t eligible under traditional FHA loan guideline (not quite 3 years since case closed) and not eligible under back to work since in 2012, when the case was closed, we are back to before the loss income. The lender stated that in the year of the actual transfer of the deed from your name to the bank, you must show the economic loss. I do not see how this program helps anyone since the average foreclosure took years.

        • ScottSheldonLoans

          The program allows you to purchase a home just one year after a short sale or foreclosure as long as you can specifically document on paper to the naked eye a loss of income which led to the foreclosure. If the foreclosure took place in 2007, but was not actually sold in the trustee’s sale until 2012-it is 36 months from the date of the trustee sale date depending on when that was you might be eligible now in March 2015. What you should do- is ask the lender to pull copy of the trustee sale date deed- than simply 36 months out from there, and that date will be the soonest you would be FHA eligible, so you don’t have to do the additional hoop jumping the FHA back to work program does require.

      • Randy staley

        There trying to say that an Ira distribution while I was layed off is being considered income and therefore put me over the 20% mark. The check was 25000.00 it was savings not income, this is crazy

      • David Horgan

        There is a company, 1st Alliance Lending, out of Hartford, Ct that is offering this program. Has anyone had any experience with a Back to Work loan?

      Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

      Hello, Reader!

      Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

      Our People

      The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

      Our Reporting

      We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

      The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

      In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

      Our Business Model

      Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

      Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

      Your Stories

      Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

      Thanks for stopping by.

      - The Credit.com Editorial Team