Buying House While In Chapter 13 Bankruptcy Mortgage Guidelines
Buying House While In Chapter 13 Bankruptcy is allowed with FHA and VA loans after one year into the repayment plan. Chapter 13 Bankruptcy does not have to get discharged to qualify for a home mortgage.
Buying House While In Chapter 13 Bankruptcy is possible with FHA and VA Loans. Most home buyers are under the impression Buying House While In Chapter 13 Bankruptcy is not possible until the bankruptcy has been discharged. This is not true with FHA and VA Loans. FHA and VA Mortgages are the only two loan program that allows Buying House While In Chapter 13 Bankruptcy. However, not every lender allows this.
Under HUD and VA Agency Mortgage Guidelines, Buying House While In Chapter 13 Bankruptcy is allowed after making 12 timely payments to the Bankruptcy Trustee. The Trustee needs to approve the housing transaction. The bankruptcy does not need to be discharged. It needs to be manual underwriting. VA and FHA Loans are the only two loan programs that allow manual underwriting.
Mortgage Programs Available For Borrowers Buying House While In Chapter 13 Bankruptcy
VA and FHA Loans are the only two mortgage loan programs available for borrowers while in Chapter 13 Bankruptcy Repayment Plan. The bankruptcy does not have to be discharged. Both VA and FHA have similar guidelines for borrowers who are in an active Chapter 13 Bankruptcy Repayment Plan. Both loan programs require manual underwriting. This is due to borrowers cannot get an approve/eligible per automated underwriting system (AUS) during Chapter 13 Bankruptcy Repayment Plan. Gustan Cho Associates are experts in helping borrowers qualify for FHA and/or VA Loans While In Chapter 13 Bankruptcy.
Chapter 13 Manual Underwriting Mortgage Guidelines
VA and FHA Manual Underwriting Mortgage Guidelines are similar and are almost the same.
Here are the Chapter 13 Manual Underwriting Mortgage Guidelines On VA and FHA Loans:
- Timely payments during Chapter 13 Bankruptcy Repayment Period to the Trustee
- Late payments during Chapter 13 Bankruptcy is very frowned upon but is not always a deal killer with extenuating circumstances
- All manual underwriting require timely payments in the past 24 months
- Manual Underwriting requires verification of rent
- Gustan Cho Associates will accept a living-rent-free-with-family letter for borrowers who do not have rental verification
- Low Payment Shock is considered a compensating factor on manual underwriting
The debt to income ratio is dependent on the number of compensating factors.
Debt To Income Ratio Guidelines On Manual Underwriting
Debt to income ratios is reduced on manual underwriting.
With FHA Loans, the following apply:
- 31% front end and 43% back end with no compensating factors
- 37% front end and 47% back end with one compensating factor
- 40% front end and 50% back end with two compensating factors
With VA Loans, the debt to income ratio can be stretched to 54% debt to income ratio with compensating factors.
Buying House While In Chapter 13 Bankruptcy And Qualifying With Manual Underwriting
Compensating Factors are positive factors by borrowers that lessen the risk of lenders.
Here are examples of compensating factors mortgage underwriters will take into account:
- Low Payment Shock of 5% or less
- Part-time, overtime income, other income borrower has had for at least a year or more but not used as qualified income
- Three months of reserves
- One month of reserves is one month’s of PITI (principal, interest, taxes, insurance)
- Larger down payment on a home purchase
Qualifying For A Mortgage While In Chapter 13 Bankruptcy With A Lender With No Overlays
For more information about the contents of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The housing market is booming. Home prices have been skyrocketing every year for the past 7 years with no sign of a housing correction. The time is now to purchase a home. Mortgage rates are at historic lows. The answer is yes. You can qualify for a mortgage during the Chapter 13 Bankruptcy repayment period. The bankruptcy does not have to be discharged. Gustan Cho Associates are experts in FHA and VA manual underwriting. GCA Mortgage has a national reputation for not having lender overlays on government and conventional loans. The Team at Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.