FHA Guidelines During Versus After Chapter 13 Bankruptcy

This BLOG On FHA Guidelines During Versus After Chapter 13 Bankruptcy Was Written By Gustan Cho

FHA Guidelines During Versus After Chapter 13 Bankruptcy state that a borrower can qualify for a FHA Loan During A Chapter 13 Bankruptcy Repayment Plan one year into their Chapter 13 Bankruptcy with the approval and blessing of their Bankruptcy Trustee. FHA Guidelines During Versus After Chapter 13 Bankruptcy state that a FHA borrower can qualify for a FHA Loan after a Chapter 13 Bankruptcy without any waiting period after the discharged date of the Chapter 13. However, many borrowers are told that there is a one to two year waiting period after a Chapter 13 Bankruptcy discharged date. Why is that? FHA Guidelines During Versus After Chapter 13 Bankruptcy is quite different. We will cover this common topic that often confuses borrowers and get you a straight answer.

Differences Between Chapter 7 Bankruptcy Versus Chapter 13 Bankruptcy

There are two types of bankruptcies and FHA differentiates and have separate distinct qualification requirements on qualifying for FHA Loans during and after both types of bankruptcies.  With FHA Guidelines During Versus After Chapter 13 Bankruptcy, there are many misunderstandings in qualifying for a FHA Loan after a Chapter 13 Bankruptcy discharged date which we will discuss thoroghly.

We will compare FHA Guidelines During Versus After Chapter 13 Bankruptcy. We will discuss what Chapter 7 Bankruptcy is and the requirements on qualifying for FHA Loans with a Chapter 7 Bankruptcy:

  • Chapter 7 Bankruptcy is called total liquidation where it benefits consumers who are overburden in debt and has no or little income to ever pay their creditors
  • There is something called a Chapter 7 Bankruptcy means test which means that consumers need to qualify to file Chapter 7 Bankruptcy which means that a consumer cannot exceed a certain income limit.
  • The purpose for a Chapter 7 Bankruptcy means tests is to determine that your income is low enough for you to be able to qualify to file a Chapter 7 Bankruptcy filing. It was created to make sure that consumers who have higher incomes from filing for a Chapter 7 Bankruptcy and file a Chapter 13 Bankruptcy instead where they can pay back their creditors
  • If consumers fail to meet the Chapter 7 Bankruptcy means test, they need to file a Chapter 13 Bankruptcy Repayment Plan. This is often the case for consumers making higher income than the median income for their geographical area. A Chapter 13 Bankruptcy are designed for higher income earners where they need time to restructure their debts and pay a portion of their income to their creditors, normally for 60 months and whatever balance of debts that is left over after the 60 months is discharged by the Chapter 13 Bankruptcy Trustee
  • Borrowers can qualify for a FHA Loan two years after a Chapter 7 Bankruptcy Discharged Date with no late payments after a Chapter 7 Bankruptcy discharged date and re-established credit

Here is what a Chapter 13 Bankruptcy is and the requirements on qualifying for FHA Loans during and after a Chapter 13 Bankruptcy Repayment Plan

  • A Chapter 13 Bankruptcy is when a consumer has employment but needs the U.S. Bankruptcy Courts help in restructuring their debts
  • You need to be employed to file a Chapter 13 Bankruptcy
  • A consumer who needs to file a Chapter 13 Bankruptcy needs to make a list of all of their creditors and list the debts they owe and what the minimum monthly payments are. The U.S. Bankruptcy Courts will assign a Chapter 13 Bankruptcy Trustee. Most Trustees are private attorneys who will oversee the whole Chapter 13 Bankruptcy process from filing through repayment period and through the Chapter 13 Bankruptcy Discharge
  • A portion of your income is set aside to pay your creditors. The Bankruptcy Trustee sets aside a payment schedule to pay the creditors for a certain term
  • After the consumer makes timely payment for the term of the Chapter 13 Bankruptcy Repayment Period, which is normally 60 months, the Chapter 13 Bankruptcy Trustee will discharge most of the consumer’s overall delinquent debts and the consumer will be debt free after the discharged date
  • FHA does not allow borrowers to qualify for a FHA Loan during a Chapter 7 Bankruptcy Process prior to a Chapter 7 Bankruptcy discharged date. You need to wait two years to qualify for a FHA after a Chapter 7 Bankruptcy discharged date
  • It is different when qualifying for a FHA Loan with a Chapter 13 Bankruptcy. Borrowers Can Qualify for FHA Loans during a Chapter 13 Bankruptcy Repayment Period prior to being discharged and you can qualify for a FHA Loan with no waiting period after your Chapter 13 Bankruptcy discharged date according to FHA Guidelines During Versus After Chapter 13 Bankruptcy
  • FHA borrowers can qualify for a FHA Loan During A Chapter 13 Bankruptcy Repayment Plan as long as they have made twelve timely payments to their creditors that is made timely and get an approval from the Chapter 13 Bankruptcy Trustee. This can only be done as a manual underwrite and with all manual underwriting, Rental Verification is required
  • Verification of Rent, or Rental Verification is 12 months canceled checks and/or 12 months bank statements that the renter has paid their landlord. This is mandatory unless the renter has rented their apartment or home from a registered property management company which a VOR form provided by the lender to the property manager can be completed by the property manager. A VOR Form from the property management company can be used in lieu of 12 months on time canceled checks and/or 12 months on time bank statement bank statements

Shopping For A FHA Lender That Has No Overlays After A Chapter 13 Bankruptcy Discharged Date

Many of our viewers reading this BLOG is reading it because many of you were probably told that you do not qualify for a FHA Loan after a Chapter 13 Bankruptcy discharged date unless you wait a one or two year waiting period. This is absolutely not true and FHA Guidelines in Qualifying for a FHA Loan after a Chapter 13 Bankruptcy discharged date requires no waiting period. Many borrowers are told that borrowers can qualify for a FHA Loan one year into a Chapter 13 Bankruptcy repayment period BUT DO NOT QUALIFY after the Chapter 13 Bankruptcy has been discharged without meeting the one year to two year waiting period. Does that make sense? Of course NOT. The one year waiting period after a Chapter 13 Bankruptcy discharged date is not FHA Guidelines on Chapter 13 Bankruptcy. It is an overlays by the lender on FHA Loans After Chapter 13 Bankruptcy discharged date.

If you are shopping for a national five star mortgage lender that has no lender overlays on FHA Loans After Chapter 13 Bankruptcy, please contact Gustan Cho and The Gustan Cho Team. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho NMLS 873293 Of The Gustan Cho Team

  • Email: gcho@gustancho.com
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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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