FHA 203k Loan After Bankruptcy And Foreclosure Mortgage Guidelines

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FHA 203k Loan After Bankruptcy And Foreclosure Mortgage Guidelines

This BLOG On FHA 203k Loan After Bankruptcy And Foreclosure Mortgage Guidelines Was UPDATED On July 27th, 2018

FHA 203k Loan After Bankruptcy And Foreclosure Mortgage Guidelines

The Federal Housing Administration has an acquisition and construction mortgage loan program for owner occupied home buyers.

  • The acquisition and construction mortgage loan is called FHA 203k Rehab Loans
  • Home buyers who have creative ideas of remodeling their homes or are interested in buying a fixer upper or foreclosure properties can now have the option to do so with a FHA 203k Rehab Loan
  • Most construction loans require that the property owner have skin in the game where majority of rehab lenders will require a 20% down payment
  • This is not the case with a FHA 203k Loan
  • FHA only requires borrowers to have a 3.5% down payment on the after improved value of the property
  • For example, here is a case study:
    • purchase a home for $100,000
    • needs $100,000 in home improvements
    • total acquisition and construction costs are $200,000
    • after improved value of the completed project is $200,000
    • borrower is required a 3.5% down payment, or $7,000, as the total funds required plus closing costs

I get many calls from home buyers who are interested in seeing if they qualify for a FHA 203k Loan After Bankruptcy and Foreclosure. The answer is yes. Home buyers can qualify for a FHA 203k Loan After Bankruptcy and Foreclosure.

About FHA 203k Rehab Loans

About FHA 203k Rehab Loans

There are two types of FHA 203k Rehab Loans.

  • The first and most popular is the FHA 203k Streamline Rehab Loans which limits the construction budget to $35,000
  • The FHA 203k Streamline Rehab Loan program limits the homeowner on the type of work that they can do
  • Homeowners cannot do structural changes to the existing home or do a room addition or any other structural repairs
  • They can do the following:
    • kitchen remodeling
    • basement remodeling
    • attic remodeling
    • bathroom remodeling
    • flooring, new windows
    • millwork
    • paint
    • siding
    • gutters
    • plumbing
    • electric
    • heating and air conditioning systems
    • appliances.

The second type of FHA 203k Rehab Loan is the full standard FHA 203k Loan program where there is no construction limit.

  • A full standard FHA 203k has no construction limit
  • Borrowers can go up to the maximum FHA Loan Limit in their area
  • Property needs to appraised after improved value
  • Borrowers can do rehab on their property as long as the rehab will support the after repair value appraisal once the job has been completed
  • Besides being able to do everything that can be done with a FHA 203k Streamline Loan, homeowners can also do the following:
    • structural repairs and room additions
    • Can even do a complete gut rehab construction project

Requirements In Qualifying For FHA 203k Loan After Bankruptcy

Requirements In Qualifying For FHA 203k Loan After Bankruptcy

Home buyers seeking a fixer upper mortgage loan can now purchase a home of their dreams with a FHA 203k Loan. Qualifying for FHA 203k Loan After Bankruptcy and Foreclosure is no issue as long as borrowers have waited out the two year mandatory waiting period after bankruptcy discharge date. There is a three year waiting period after foreclosure, deed in lieu, short sale. To qualify for FHA 203k Loan After Bankruptcy and Foreclosure, borrowers need a minimum of a 580 credit score and must meet FHA lending guidelines. Lenders do expect borrowers to have re-established credit after bankruptcy and foreclosure with no late payments or derogatory credit after bankruptcy and/or housing event. Whether it is a FHA 203k Streamline Rehab Loan or Full Standard FHA 203k Loan, please contact us at Gustan Cho Associates at 262-716-8151. We have no overlays on government and conforming loans. We have zero overlays on 203k Mortgages and just follow HUD Guidelines.

4 Comments
  1. Ben says

    I have extenuating circumstances involved in my bankruptcy. I could not find and/or keep employment due to disability. I filed a claim for VA disability which was finally awarded a year later at 100% compensable rating. Also, with rehabilitation I was finally able to secure permanent Federal employment, so I have two incomes and a great credit score. By that time, however, it was too late and I had already filed ch7 and did a short sale. I know some loan products will shorten the waiting period if there were extenuating circumstances. Is this the case with 203K?

    1. Gustan Cho, NMLS 873293 says

      FHA 203k Loan Programs has the same guidelines as a regular FHA Loan. However, there are overlays with FHA 203K loans such as maximum debt to income ratios of 50% dti AND we like to see a 640 FICO credit score. Whatever FHA guidelines are, it applies the same with 203k Loans. Your rates on 203k loans will be higher so after you complete the rehab via 203k loan, your property will appreciate much higher than the rehab cost invested. Please contact me if you have any questions.

      Gustan Cho NMLS 873293
      Area Manager
      The Gustan Cho Team

  2. Christian says

    My bankruptcy was discharged back on May 18th 2018 not yet the required 2 years. Is it possible for me to still get preapproved and not have a closing date until after the required two year? I am less than 2 months away from the 24 month mark. Will any lender assist me or do I have to fully wait for the 2 year?

    1. Gustan Cho, NMLS 873293 says

      Yes, we can help you get qualified. However, the pre-approval will be contingent upon you meeting the 2-year mandatory waiting period after the discharged date of your bankruptcy. Please call and/or text us at 262-716-8151 or email us at gcho@gustancho.com. Looking forward to working with you and your family.

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