Chapter 13 Home Loan Guidelines On FHA And VA Loans

This Article Is About Chapter 13 Home Loan Guidelines On FHA And VA Loans

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
  • However, borrowers need to be in the Chapter 13 repayment plan for at least 12 months
  • 12 months of timely payments need to be made to become eligible for FHA and/or VA loans during Chapter 13 repayment plan
  • Bankruptcy trustee need to sign off on the home purchase and mortgage
  • Trustees will sign off on a home purchase and home loan during Chapter 13 Bankruptcy repayment plan with no issues
  • Chapter 13 Bankruptcy does not have to be discharged
  • Not all lenders will approve FHA and/or VA loans during Chapter 13 Bankruptcy repayment plan even though HUD and VA Agency Guidelines state borrowers qualify during repayment plan
  • Not all lenders do manual underwriting
  • Lenders can have higher lending requirements called lender overlays

Gustan Cho Associates are expert in manual underwriting on FHA and VA loans. Gustan Cho Associates has no lender overlays on government and conventional loans. We just go off the automated findings of the automated underwriting system (AUS) and have no other lender overlays. 

Manual Underwriting Guidelines On FHA And VA Loans

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

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
  • Manual underwriting guidelines apply
  • Mortgage underwriters have a lot of underwriter discretion on manual underwrites

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
  • This holds true 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. Not all lenders will do manual underwriting. However, a large percentage of our mortgage loan applications are FHA and/or VA manual underwrites.

Manual Underwriting Guidelines

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 underwriting system versus manual underwriting is with manual underwrites, a human mortgage underwriter closely underwrites the borrower
  • Compensating factors is key with all manual underwrites
  • Compensating factors is important for borrowers with higher debt to income ratios
  • 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
  • Mortgage underwriters have a lot of discretion on manual underwrites
  • The VA has no debt to income income ratio caps on VA loans 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
  • Gustan Cho Associates will exempt verification of rent for borrowers who are living rent free with family due to save money for the down payment and closing costs on a home purchase

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

Chapter 13 Home Loan Guidelines After DischargeWhat are the guidelines for manual risk assessment

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, The team at 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 [email protected]

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