How to purchase after foreclosure & short sale

HUD/FHA  guideline update reduces wait times for qualifying homeowners.

Stockton and Sacramento residents can now take advantage of new FHA guidelines (the back to work program)that permit qualifying borrowers to purchase 12 months after a major credit event like foreclosure, shortsale , deed in lieu, modification and/ or bankruptcy.


Your 3 year waiting period may be over!!


For the technical details you can visit HUD – Mortgagee Letter 2013-26

Borrowers that were previously considered ineligible for an FHA insured mortgage may now be eligible after an economic event which includes foreclosures, short sale, deed lieu, loan modification, and bankruptcy.  This is certain to impact thousands of wishful homebuyers in Stockton and Sacramento who until today were considered ineligible to purchase a home using FHA financing.

An Economic Event is any occurrence beyond the borrower’s control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower’s Household Income of twenty (20) percent or more for a period of at least six (6) months.

The guidelines in a nutshell:

Homeowners who experienced an Economic Event that stemmed from income or job loss that lasted for 6 months or more may qualify.

Home Ownership Counseling

Potential borrowers will be required to take a HUD approved homeownership education and counseling course.  This must be done 30 days prior to loan application, but not more than 6 months before. Approved HUD courses can be found here


  • Buyer’s credit score must be above minimum score required
  • 12 months of clean credit history  (No 30 day late payments on revolving credit and mortgages)
    • Alternative Credit (Used if borrower lacks open credit lines)
      • No history of delinquency on rental housing
      • No more than one 30 day late to other creditors
      • No collection / court record reporting (other than medical/ id theft)

Loss of Employment

The lender must verify and document the Loss of Employment by obtaining:

  • Lender will obtain a Verification of Employment (VOE) – evidencing the termination
  • Business closure will require a written termination letter, suitable documentation of business closure, or documentation of receipt of unemployment income.

Loss of Income

  • Borrower will verify loss of income of 20% or more through:
  • Written VOE evidencing prior income
  • Signed tax returns
  • Supporting W2’s

Credit Analysis:

The lender will review the above factors and make sure the borrower exhibited satisfactory credit prior to economic event, the derogatory credit occurred after the economic event, and that the borrower has re-established satisfactory credit for a minimum of twelve (12) months.  The back to work program is a tough loan, but possible to accomplish with the right lender.

With new guidelines in place many CA residents will be primed to purchase after the toll the “Great Recession” has taken. Contact me today to see if you’re ready to buy today.


Jeff Womack

Jeff Womack

Sr Loan Officer and Mortgage Blogger at The Mortgage House Inc.
HARP, FHA, VA, Conventional, USDA, down payment assistance. Blogger and mortgage expert helping potential home buyers finance homes . Serving Stockton, Lodi, Elk Grove, Sacramento (NMLS #262055)
Jeff Womack


Mortgage & real estate information with your home loan expert in the Stockton and Sacramento area.
Jeff Womack