WASHINGTON – On Thursday, the Federal Housing Administration (FHA) announced new flexibility for lenders when qualifying borrowers for an FHA loan, specifically those applicants who had previous employment gaps or a loss of income due to the COVID-19 pandemic.

According to updates in Mortgagee Letter 2022-09, salaried and hourly wage-earners, as well as self-employed individuals affected by COVID-19, will have a greater opportunity to purchase a home using FHA-insured mortgage financing, providing they now have a stable income.

“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,” says FHA Commissioner Julia Gordon. “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.”

FHA defines a COVID-19 related economic event as a temporary loss of employment, temporary reduction of income, or temporary reduction of hours worked during the Presidentially Declared COVID-19 National Emergency.

The new guidance includes provisions for salaried and non-salaried wage earners, and it addresses the needs of people who are employed full-time, self-employed, employed part-time, earn bonus or tip income, and/or earn commission income.

Lenders may begin using the new policies immediately but must implement them for FHA case numbers assigned on or after Sept. 5, 2022.

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