Chapter 13 Home Loan Guidelines On FHA And VA Loans

This ARTICLE On Chapter 13 Home Loan Guidelines On FHA And VA Loans Was PUBLISHED On March 11th, 2020

Chapter 13 Home Loan Guidelines On FHA And VA Loans (1)

Chapter 13 Home Loan Guidelines On FHA And VA Loans allow borrowers to qualify for home loans during and after Chapter 13 Bankruptcy.

  • FHA and VA Loans are the only two long programs that allow mortgage borrowers to qualify for home mortgages during Chapter 13 Bankruptcy Repayment Plan
  • The Chapter 13 Bankruptcy does not have to be discharged
  • Both FHA and the VA Chapter 13 Home Loan Guidelines On FHA And VA Loans are the same
  • VA and FHA are the two only loan programs that permit manual underwriting
  • Any Chapter 13 Bankruptcy that has not been seasoned two years after discharged date needs to be a manual underwrite
  • This holds true when a borrower is in an active Chapter 13 repayment plan

In this article, we will cover and discuss Chapter 13 Home Loan Guidelines On FHA And VA Loans.

Chapter 13 Home Loan Guidelines On FHA And VA Loans And How It Works

In this paragraph, we will discuss qualifying for an FHA and VA loan during Chapter 13 Bankruptcy repayment plan.

  • In order to qualify, the borrower needs to have filed Chapter 13 Bankruptcy at least 12 months ago
  • The borrower needs to provide the lender they have made timely payments in the past 12 months to the Bankruptcy Trustee
  • The Trustee needs to approve the home purchase and the new housing payment
  • Bankruptcy Trustees normally sign off on all home purchase requests by mortgage borrowers as long as the home price is reasonable and the consumer can afford the new housing payment

Gustan Cho Associates are experts in helping borrowers qualify for FHA and VA Loans during and after Chapter 13 Bankruptcy.

Manual Underwriting Guidelines

What are the guidelines for manual risk assessment

As mentioned in the earlier paragraph, FHA and the VA are the only two federal agency that allow manual underwriting on home loans.

  • The difference between automated undewriting system versus manual underwriting is with manual underwrites, a human underwriter closely underwrites the borrower
  • Compensating factors is key with all manual underwrites
  • All borrowers need to abide by the VA and/or HUD mortgage guidelines
  • However, scrutiny is emphasized when it comes to debt to income ratios
  • The VA has no debt to income income ratio caps when it comes to automated underwriting system (the AUS) findings
  • However, with manual underwriting, lenders do not want to see borrowers surpass 50% DTI unless there are strong compensating factors
  • Verification of rent is normally required on manual underwriting

Payment shock is scrutinized on manual underwrites. Mortgage underwriters want to see low payment shock.

Chapter 13 Home Loan Guidelines After Discharge

Many of our viewers visit us at Gustan Cho Associates because they were told by other lenders they do not qualify for a VA and/or FHA loan right after Chapter 13 discharged date. They are often told they need to wait one to two years to qualify after Chapter 13 bankruptcy discharged date. However, this is not the case. Both HUD and VA Guidelines state there is no mandatory waiting period after Chapter 13 Bankruptcy discharged date. However, the automated underwriting system will not render an approve/eligible per AUS if the discharge has been seasoned less then two years. Therefore, all VA and/or FHA loans with less than 2 year seasoning from the discharged date needs to be manual underwriting. Not all lenders do manual underwriting on VA and FHA loans. However, Gustan Cho Associates are experts in originating, underwriting, and funding manual underwrites. Borrowers who need to qualify for a mortgage during and/or after Chapter 13 bankruptcy, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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