Chapter 13 Mortgage Approval Guidelines On FHA And VA Loans

This Article Is About Chapter 13 Trustee Mortgage Approval Guidelines On FHA And VA Loans:

Tips And Advice in getting Chapter 13 Trustee Mortgage Approval During Chapter 13 Repayment Plan On VA and FHA Loans:

As you already know, Gustan Cho Associates are experts in mortgage financing revolving around bankruptcies. If you are currently in a chapter 13 bankruptcy, one of the steps to get approved for a mortgage is getting permission to enter into the loan from your bankruptcy trustee. Now, this step sounds confusing and scary to some. VA and FHA allow borrowers to qualify for home loans during Chapter 13 Bankruptcy Repayment Plan with manual underwriting.

Chapter 13 Trustee Mortgage Approval Guidelines on FHA and VA Loans are almost identical.

FHA And VA Chapter 13 Trustee Mortgage Approval Guidelines On Manual Underwriting

We have been helping our clientele complete mortgage transactions during bankruptcies for years now.

Since we do not have any LENDER OVERLAYS, we are able to complete these loans. The qualifications are quite simple. The mortgage process during chapter 13 is almost the same for clients who are not in Chapter 13. You must use either an FHA or VA loan while in Chapter 13 Bankruptcy. You must be in the chapter 13 repayment plan for at least 12 payments, usually 13 or 14 months as your first payment to the trustee is not always due right away.

You must make at least 12 ON TIME payments to the trustee before applying for the mortgage. As long as you have made the 12th payment on Chapter 13 Bankruptcy repayment, you are now eligible to qualify for a home mortgage. Chapter 13 Bankruptcy does not have to be discharged.

Mortgage Process During Chapter 13 Bankruptcy Repayment Plan

What are the steps to take after making your 12th payment?

You will gather the following documentation:

  • Last 60 Days Bank Statements – to source money for the down payment
  • Last 30 Days Pay Stubs
  • Last Two Years W2’S
  • Last Two Years Tax Returns
  • Driver’s License
  • Chapter 13 paperwork
  • Certificate of Eligibility (for VA clients)

Once you have all the required documentation, call Mike Gracz on 630-659-7644 or text us for a faster response. Or email us at [email protected]. Mike will answer any questions you have and connect you with a licensed loan officer in your state. You will then go through the pre-approval process. Once issued a pre-approval letter, you will contact your bankruptcy attorney, and let them review the information.

Starting The Mortgage Process During Chapter 13 Bankruptcy 

The next step will be presenting your mortgage qualifications to the trustee. See below.

  • Now that you have been prequalified, it is time to get permission from the trustee
  • You will simply contact your bankruptcy attorney and let them know you are ready to enter into a mortgage
  • They will then contact the trustee on your behalf and set up a trustee review
  • The trustee will look over your pre-approval letter and source of down payment

Sometimes they will ask for additional information.

Case Scenario Of Qualifying For An FHA Loan During Chapter 13 Bankruptcy Repayment Plan

Eligibility for an FHA loan under a Chapter 13 Bankruptcy Repayment Plan

It is important to understand some of the basics the trustee will be going through. We will give you a few examples:

Example 1;

  • Rent payment is $2000
  • Since entering into Chapter 13 Bankruptcy you have not missed any rental payments or any payments to the trustee, in fact, you have not missed any payments at all
  • You are looking to obtain a mortgage loan where your total payment will be $2100
  • Since your current rental payment and the new mortgage payment are almost identical, the trustee should sign off on this no questions asked
  • Your current That is not always the case but when rent and mortgage payments are similar, you do not have to worry about PAYMENT SHOCK.

Example 2;

  • You currently pay $1500 in monthly rent and are looking to purchase a home that is large enough for your family
  • Your mortgage payment is now going up to $2200
  • At this point, the trustee will more than likely want to review your chapter 13 bankruptcy
  • They will need to verify you will be able to afford the new payment
  • It gets a bit more complicated than that, now the trustee understands that you have excess cash
  • They may reopen your bankruptcy case and ask you to pay more to your creditors
  • So, this can be a catch 22
  • It may make sense for you to finish your payments to the trustee before obtaining a home loan
  • We can still help obtain the mortgage less than two years from the discharge date of the bankruptcy

As stated above, we do not have any lender overlays getting in the way of us helping our clients. Bankruptcy laws were put in place to protect Americans from going through financial struggles. They are part of our society and no longer stand in your way of obtaining an FHA or VA home loan. Please reach out to the bankruptcy mortgage experts!

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