Bad Credit? Getting an FHA Loan Just Got Easier


What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Those who lost their home because of job loss won't have to wait as long to qualify for an FHA-insured loan.

This post comes from Christine DiGangi at partner site Credit.com.

Homebuyers who lost their homes because of recession-induced employment cuts may be able to return to the housing market sooner than they previously thought.

The Federal Housing Administration has added economic events to its list of extenuating circumstances and reduced the waiting period between foreclosure and loan qualification from 36 months to 12 months.

“This will help consumers who went through housing hell — a foreclosure or short sale — to become homeowners again and take advantage of low interest rates and decent home prices in many parts of the country,” said Gerri Detweiler, Credit.com’s director of consumer education.

How FHA loans work

The FHA, part of the U.S. Department of Housing and Urban Development, insures mortgages to allow lenders to give borrowers affordable loans, by way of easy credit qualifications, reduced down payments or lower closing costs.

To apply for an FHA loan under the shortened timeline, borrowers must meet certain criteria: The borrower must have experienced a period of six months or longer during which household income was reduced by at least a 20 percent, as a result of job loss or pay cuts beyond the borrower’s control; re-established his or her credit for at least a year; and completed housing counseling.

An FHA letter dated Aug. 15 outlines the requirements in greater detail. The adjustments to the loan program were effective immediately, through September 2016.

“The purpose is to assist those who faced an economic event as a result of the Great Recession,” said Lemar Wooley, a HUD public affairs officer. “The period of time was selected because we believe it appropriately captures the population of those impacted by the recession and gives sufficient time for them to rebuild their credit.”

How to qualify for an FHA loan

Eddie Hilliard, branch manager of Integrity Home Loan of Central Florida, said he is already starting to work with homebuyers who may qualify. For the past three months, Florida has had the highest foreclosure rate in the country.

“I can’t tell you right now how many people I had to turn away over the last year, year and a half, two years,” Hilliard said. “‘Sorry, you had a foreclosure in the last 36 months, can’t do it.’ Now I’m going to be making all these calls saying, ‘Hey Mr. and Mrs. Jones, guess what — the guidelines have changed.’”

Meeting the borrower criteria requires many steps of documenting your income and credit history. Hilliard recommends potential homebuyers reach out to lenders with experience in FHA loans so the process goes as smoothly as possible. For instance, a borrower must complete the mandatory housing counseling at least 30 days and no more than six months in advance of applying for a loan. That’s something to consider before the house hunt commences — timing is important.

It’s also crucial for consumers to check their progress in repairing their damaged credit. Re-established credit, according to the FHA letter, means a history clear of late housing payments, late debt payments or issues on revolving accounts, and any current mortgages must show a year of timely payments. Potential homebuyers can use the free Credit Report Card to see how they’re recovering and make plans to improve their credit. You can also pull your credit report once a year for free from each of the major credit reporting bureaus.

The timing of this program may be a huge opportunity for some who thought they couldn’t buy a home for a few more years.

“Now’s the time for those who really can afford to own a home to do so, before we see interest rates and housing prices climb,” Detweiler said. “These loans can help turn renters into homeowners, which in turn helps stabilize neighborhoods and communities.”

More on Credit.com:

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: Considering a Fixer-Upper? 15 Ways to Avoid a Money Pit

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,965 more deals!