In this blog, we will cover and discuss buying house while in Chapter 13 Bankruptcy. Chapter 13 Bankruptcy is a five-year repayment plan prior to a discharge. Homebuyers no longer have to wait until the bankruptcy has been discharged to qualify for a mortgage. The bankruptcy trustee needs to sign off on the mortgage. Most trustees have no issue signing off on a mortgage during the Chapter 13 repayment plan. 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. In the following paragraphs, we will cover and discuss buying house while in Chapter 13 Bankruptcy.
Can I Get a Mortgage Buying House While in Chapter 13 Bankruptcy?

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. Not all mortgage lenders have the same lending requirements on FHA and VA loans. Both VA and FHA loans have their own lending guidelines. However, lenders can higher lending requirements above and beyond VA and FHA called lender overlays.
How Soon After Filing Chapter 13 Can I Buy a House?
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.
What Is Manual Underwriting During Chapter 13 Mortgage Process?
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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.
When Is Manual Underwriting For a Mortgage Required?
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 are very frowned upon but are not always a deal killer with extenuating circumstances.
What Is Required For Manual Underwriting
All manual underwriting requires 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 for 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 55% front end and 65% back-end debt to income ratio with compensating factors.
Debt To Income Ratio Guidelines on 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, or 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
Mortgage Lenders That Work With Chapter 13 Bankruptcy
For more information about the contents of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. 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.
What Are The Eligibility Requirements Buying House While in Chapter 13 Bankruptcy?
It’s possible to buying house while in Chapter 13 bankruptcy. Buying house while in Chapter 13 Bankruptcy is possible with FHA and VA loans. 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
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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 discharge date to qualify for FHA and VA loans. Under HUD and VA mortgage guidelines, there is no waiting period after the Chapter 13 bankruptcy discharge 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 mortgage lenders will have overlays and not accept manual underwriting.
FHA vs VA Loans During Chapter 13 Bankruptcy
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 has 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.
How Long After Chapter 13 Can I Get a Mortgage?
Homebuyers can qualify for a VA and FHA loan one year after filing Chapter 13 Bankruptcy. 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.
The team at Gustan Cho Associates never had any issues with a bankruptcy trustee signing off on a mortgage. 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.
Do Lenders Have Different Mortgage Guidelines on Buying House During 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 during a Chapter 13 after 12 months with trustee approval.
Qualifying for a Mortgage Buying House While in Chapter 13 Bankruptcy
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 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates Mortgage Group is available 7 days a week, on evenings, weekends, and holidays.
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Buying House While in Chapter 13 Bankruptcy With FHA and VA Loans
Buying house while in Chapter 13 Bankruptcy is possible. Homebuyers in an active Chapter 13 Bankruptcy do not have to get their Chapter 13 Bankruptcy discharged for buying house while in Chapter 13 Bankruptcy. You can qualify for a mortgage during the Chapter 13 Bankruptcy repayment period.
The two mortgage loan programs that allow financing during an active Chapter 13 Bankruptcy are FHA and VA loans. Gustan Cho Associates are experts in FHA and VA manual underwriting. Gustan Cho Associates 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, on evenings, weekends, and holidays.
Get Qualified For an FHA and VA Loan During Chapter 13
This blog on buying house while in Chapter 13 Bankruptcy was updated on August 11th, 2022
August 11, 2022 - 7 min read