FHA expands mortgage eligibility for borrowers affected by COVID-19

The Federal Housing Administration (FHA) is adding new flexibility that mortgage lenders can pass along to qualifying borrowers who experienced a gap in employment or loss of income because of the COVID-19 pandemic.

In the agency’s just-released Mortgagee Letter 2022-09, it stated that salaried, self-employed, and hourly wage-earners who were affected by COVID-19 but now have steady income will now have a much better chance at buying a home through affordable FHA-insured mortgage financing.

“The changes we are announcing today further our efforts to facilitate recovery from COVID-19 and support access to homeownership, particularly for populations most deeply impacted by the pandemic,” said FHA Commissioner Julia Gordon. 

“The pandemic affected the livelihoods of tens of millions of workers in this country, particularly workers of color and those at the lower end of the wage scale. Limiting these families’ homeownership opportunities because of the unavoidable impacts of an unprecedented global health crisis, when they are otherwise well-qualified for a mortgage, is unnecessary and contrary to this Administration’s goals and FHA’s mission.”

Applicants need to provide documentation

Mind you, this is not an all-inclusive, no-questions-asked change. There are more than 20 pages of the different categories, documentation, and calculations that the FHA will require from a borrower.

Fortunately, the agency has compiled all the program’s caveats so that applicants can quickly find the things they need — like profit and loss statements, balance sheets, business and credit reports, and tax returns. The biggest hurdles that ConsumerAffairs identified will affect people who frequently changed jobs and employees who are on temporary leave.

Among other things, those who frequently changed jobs will need to verify and document their income to show that they are in a stable financial condition. They’ll also need to either obtain transcripts of training and education demonstrating qualification for a new position or employment documentation evidencing continual increases in income and/or benefits. 

Those on temporary leave will be required to provide a written statement confirming their intent to return to work, their intended date of return to work, documentation from their current employer confirming their eligibility to return to work after temporary leave, and documentation of sufficient liquid assets.

Doing your FHA homework

Anyone who wants to take out an FHA-backed mortgage would be wise to do a little homework. ConsumerAffairs has a package of guides and FAQs that should help anyone no matter what FHA question they have. They include:

The FHA and the U.S. Department of Housing and Urban Development (HUD) also provide informational material that can help with questions or concerns about applying for pandemic-related mortgage applications. Those resources include:

The HUD frequently updates changes and answers questions via social media as well. Here’s a list of all the agency’s social media sites.