FHA Guidelines During Versus After Chapter 13 Bankruptcy

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FHA Guidelines During Versus After Chapter 13 Bankruptcy

This BLOG On FHA Guidelines During Versus After Chapter 13 Bankruptcy Was PUBLISHED On September 9th, 2019

FHA Guidelines During Versus After Chapter 13 Bankruptcy
Gustan Cho Associates

VA and FHA FHA Guidelines During Versus After Chapter 13 Bankruptcy are exactly the same. We will be covering FHA Loans on this blog. Whatever the guidelines on Chapter 13 is, it is exactly the same with VA Loans.

VA and FHA Guidelines state that borrowers can qualify for a FHA Loan During A Chapter 13 Bankruptcy Repayment Plan:

  • Need to be one year into their Chapter 13 Bankruptcy with the approval and blessing of their Bankruptcy Trustee
  • VA and FHA Guidelines During Versus After Chapter 13 Bankruptcy state borrowers can qualify for home loans 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

In this article, we will cover and discuss FHA Chapter 13 Guidelines and qualifying for FHA Loans during and after Chapter 13.

Differences Between Chapter 7 Bankruptcy Versus Chapter 13 Bankruptcy

what is Differences Between Chapter 7 Bankruptcy Versus Chapter 13 Bankruptcy

There are two types of bankruptcies:

  • HUD 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 thoroughly.

Comparing HUD Bankruptcy Guidelines

what is Comparing HUD Bankruptcy Guidelines

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
  • 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.

Bankruptcy Means Test

Bankruptcy Means Test

Chapter 7 Means Test 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 if income is low enough 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.

Cases Where You Cannot File Chapter 7 Bankruptcy

what are Cases Where You Cannot File Chapter 7 Bankruptcy

This is often the case for consumers making higher income than the median income for their geographical area.

  • Chapter 13 Bankruptcy was designed for higher income earners where they need time to restructure their debts
  • Petitioners pays a portion of their income to their creditors, normally for 60 months
  • 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
  • No late payments after a Chapter 7 Bankruptcy discharged date and re-established credit is required to get an AUS APPROVAL

HUD Chapter 13 Guidelines

what are HUD Chapter 13 Guidelines

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
  • 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 income is set aside to pay 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 Trustee will discharge most of the consumer’s overall delinquent debt
  • Consumer will be debt free after the discharged date
  • HUD does not allow borrowers to qualify for a FHA Loan during a Chapter 7 Bankruptcy Process prior to a Chapter 7 Bankruptcy discharged date
  • 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

Waiting Period Requirements After Bankruptcy

what are Waiting Period Requirements After Bankruptcy

Borrowers 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.

  • Borrowers can qualify for a FHA Loan During A Chapter 13 Bankruptcy Repayment Plan
  • This holds true as long as they have made twelve timely payments to their creditors that is made timely
  • Need approval from the Chapter 13 Bankruptcy Trustee
  • This can only be done as a manual underwrite
  • 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
  • VOR form is provided by the lender to the property manager
  • It is completed, dated, and signed 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 Lender With No Overlays

Shopping For Lender With No Overlays

Many of our viewers reading this BLOG is reading it because they probably were told they do not qualify for a FHA Loan after a Chapter 13 Bankruptcy discharged date unless they wait a one or two year waiting period.

  • This is absolutely not true
  • HUD 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 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 are not HUD Guidelines on Chapter 13 Bankruptcy

It is an overlay by the lender on FHA Loans After Chapter 13 Bankruptcy discharged date.

Qualifying With A Direct Lender With No Overlays Experience In Chapter 13 Bankruptcy

Qualifying With A Direct Lender With No Overlays Experience In Chapter 13 Bankruptcy

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

Gustan Cho NMLS 873293 Of Gustan Cho Associates Mortgage Group

  • Email: gcho@gustancho.com
  • 262-716-8151 Please Text For Faster Response With Contact Information Including Email Address
  • Available 7 days a week, evenings, weekends, and holidays to take calls from 50 states

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