Buying a House During and After Chapter 13 Bankruptcy

It’s possible to buy a home while in Chapter 13 bankruptcy.

  • Most conventional (non-government) mortgages require a waiting or seasoning period following a Chapter 13 bankruptcy discharge.
  • FHA and VA programs allow borrowers to finance a home after making 12 on-time payments into their bankruptcy plan if the trustee approves.
  • Non-prime loan programs from portfolio mortgage lenders may finance borrowers immediately after bankruptcy discharge.

You do not have to wait for Chapter 13 bankruptcy discharge to get a mortgage.

Prequalify for a loan with a Chapter 13 bankruptcy in about five minutes. 

Mortgages During Chapter 13 Bankruptcy 

You can buy a house during and after Chapter 13 bankruptcy with FHA and VA Loans. Many people do not realize this. Even many bankruptcy attorneys do not understand that filing Chapter 13 bankruptcy doesn’t force you to remain a renter if you want to buy a home.

Many lenders require a mandatory waiting period after a Chapter 13 Bankruptcy discharged date to qualify for FHA and VA Loans. Under HUD and VA mortgage guidelines, there is no waiting period after the Chapter 13 bankruptcy discharged date to qualify for home loans.

Mortgage applications with a Chapter 13 bankruptcy discharge less than two years old must go through manual underwriting. Manual underwrites are allowed with VA and FHA loans but many lenders won’t do it. 

FHA vs VA Loans

VA home loans offer the best deal in mortgage financing if you’re eligible. You don’t have monthly mortgage insurance. You don’t have minimum credit scores or maximum debt-to-income ratios. And you don’t have to make a down payment and there are no loan amount limits (although there are limits for zero down loans).

However, VA mortgages are only available to eligible US servicemembers and veterans. Borrowers need to be active and/or retired members of our U.S. Armed Services with a certificate of eligibility (COE)

FHA mortgage have a 580 minimum credit score with a 3.5% down payment and 500 for a loan with 10% down. The maximum DTI is usually 50% but can be as high as 57%. There is an upfront mortgage insurance premium of 1.75% plus monthly insurance premiums for the life of the loan. And there are loan amount limits.

But FHA loans are available to anyone who qualifies.

What is the requirement for a VA credit rating

FHA and VA Mortgage During Chapter 13 

VA and FHA mortgages have the same guidelines for qualifying during the Chapter 13 Bankruptcy repayment period. You need to have made 12 months of timely payments to the trustee, and you need the permission of the bankruptcy trustee.

Most will not have any issues in getting bankruptcy trustee Approval as long as they are able to afford their proposed housing payment. It needs to be manual underwriting. Borrowers with higher debt to income ratios need to be otherwise highly-qualified.

See today’s mortgage rates. 

Lender Overlays for Chapter 13 Bankruptcy

What are Agencies Versus Lender Overlays in Chapter 13 Bankruptcy.

Many of our viewers reading this article may have gone to lenders who told them they do not qualify for VA and/or FHA Loans after Chapter 13 Bankruptcy unless two years have passed. This is not true per agency guidelines.

Many lenders require a one and/or two-year waiting period after the discharge date but that is the lender’s choice (an overlay) and not a VA or FHA requirement.  At Gustan Cho Associates we have no overlays and can finance you after a Chapter 13 bankruptcy with no waiting period. Or even durig a Chapter 13 fter 12 months with trustee approval.

Qualifying for a Mortgage with No Overlays

Gustan Cho Associates has no overlays for government and conventional loans. A large percentage of our VA and FHA Loans are manual underwrites. We are experts in helping borrowers qualify for VA and FHA Loans during and after Chapter 13 Bankruptcy. For more information on this topic and/or other mortgage topics, please contact us at 262-716-8151 or text us for a faster response. Or email us at [email protected] Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

Get a custom mortgage rate quote now. 

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