FHA Guidelines On Chapter 13 Versus Chapter 7 Bankruptcy

This BLOG On FHA Guidelines On Chapter 13 Versus Chapter 7 Bankruptcy Was UPDATED On November 19th, 2017

Home Buyers can qualify for FHA Loans after Bankruptcy per FHA Guidelines On Chapter 13 Versus Chapter 7 Bankruptcy.

  • However, the FHA Guidelines On Chapter 13 Versus Chapter 7 Bankruptcy are different
  • Many home buyers get different answers by different lenders when they ask about FHA Guidelines On Chapter 13 Versus Chapter 7 Bankruptcy
  • Government Loans and Conventional Loans have different mortgage guidelines on qualifying for Mortgage On Chapter 13 Bankruptcy Versus Chapter 7 Bankruptcy

There are two types of FHA Guidelines On Chapter 13 Versus Chapter 7 Bankruptcy:

  1. The First Is The HUD Guidelines (HUD is the parent of FHA)
  2. The Second Are FHA Lender Overlays that is required by individual mortgage lenders

Buying Home After Bankruptcy And Foreclosure

The real estate and credit meltdown of 2008 have affected millions of Americans throughout the United States.

  • Millions of hard working Americans have lost their jobs and businesses
  • Others have lost their homes and had to settle for minimum wage jobs
  • Bankruptcy and foreclosure rates have soared to historical highs  
  • Millions of Americans who lost their jobs or businesses were living off their credit cards and other credit where they eventually could not pay the debts they incurred
  • Those who could afford to file bankruptcy did so while others did not have attorney fees to file bankruptcy and just dodged bill collectors
  • Fortunately, many have recovered now
  • Many still have outstanding debts, charge offs, and collections and are contemplating filing bankruptcy to clear their old debts
  • I run into situations like these all the time
  • I am not a bankruptcy attorney and cannot offer legal advice but can offer my opinion
  • Home Buyers who have had prior bad credit, charge offs, and collections from years ago can qualify for FHA Loans with outstanding collections and charge offs without filing bankruptcy
  • Filing bankruptcy might not be the best option 

Qualifying For FHA Loans After Chapter 7 Bankruptcy

Per FHA Guidelines On Chapter 13 Versus Chapter 7 Bankruptcy, qualifying for FHA Loans after Chapter 7 Bankruptcy discharged date is different than borrowers who have a Chapter 13 Bankruptcy.

Here are the FHA Guidelines After Chapter 7 Bankruptcy:

  • FHA requires a two year waiting period after Chapter 7 Bankruptcy discharge date 
  • Minimum credit scores of 580 for 3.5% down payment FHA Loans
  • No late payments after Chapter 7 discharged date
  • One or two late payments is not a deal killer as long as the borrower gets an approve/eligible per Automated Underwriting System Approval

Qualification Requirements On FHA Loans During And After Chapter 13 Bankruptcy

FHA mortgage borrowers can qualify for FHA Loans during Chapter 13 Repayment and after Chapter 13 discharged date with The Gustan Cho Team at USA Mortgage:

  • Home Buyers can qualify for FHA Loan during a Chapter 13 Repayment period
  • They need to be paying on their repayment of their Chapter 13 Bankruptcy for at least 12 months
  • Need Trustee Approval: 100% of the time the Chapter 13 Bankruptcy Trustee will approve it
  • Their is no waiting period after Chapter 13 Bankruptcy discharged date with The Gustan Cho Team at USA Mortgage
  • Verification Of Rent is required unless borrowers are living with family
  • Minimum credit scores required for 3.5% down payment FHA Loan home purchase loan
  • Manual underwriting 

Qualifying For FHA Loans With Open Collections And Charge Offs

People who have old collections or charge off account can still qualify for FHA Loans without having to pay them:

  • The older the collection account is, the less likely the collection agency will come after consumers
  • Charge off accounts are creditors who wrote consumers off 
  • Creditors do sell charge off accounts to collection agencies for pennies on the dollar
  • Consumers should also check with their state’s statute of limitation laws and see how long your debt collector has to collect an old debt
  • Another thing consumers need to consider is that derogatory credit items will fall off credit report after 7 years from the date of last activity 
  • Bankruptcies stay on your credit report for a period of 7 years
  • The older the derogatory credit item is, the less impact it has on credit scores
  • If debt collectors are leaving consumers alone waiting out the statute of limitations can be an option
  • Consumers can start re-establishing new credit and improve credit scores right after bankruptcy and/or foreclosure
  • The easiest fix would be getting new secured credit cards to rebuild credit
  • Positive new credit will boost credit scores and offset old negative credit
  • There are many cases where people have had prior bad credit but re-established new positive credit and have credit scores of over 700 FICO  in less than a year
  • The Gustan Cho Team at USA Mortgage is a direct mortgage lender with no overlays and help many people who have had prior bad credit with outstanding open collections, charge offs, and prior late payments qualify for FHA Loans
  • Those with outstanding collections and charge offs, do not pay them
  • By paying them, it will reactivate the statute of limitations and drop credit scores 

Qualifying For FHA Home Loans With Judgments

There are cases where filing bankruptcy might be the only option.

  • Consumers who have multiple judgments for large dollar amounts filing bankruptcy might be the best possible option
  • Judgments are the worst type of derogatory item a consumer can have
  • Judgments are normally good for at least 10 years
  • A judgment creditor can renew a judgment for another 10 years depending on which state the judgment was filed
  • Home Buyers can qualify for FHA Loans with outstanding judgments and tax liens 
  • They need to have a payment arrangement with the judgment creditor
  • They need to provide that they have been paying the judgment creditor for three months
  • Mortgage Borrowers with judgments need to provide the mortgage lender three months of cancelled checks to qualify for FHA Loans with outstanding judgments
  • Other mortgage lenders might have internal mortgage lender overlays that the judgment be paid off
  • Borrowers can also settle with the judgment creditor for a percentage of what they owe
  • Borrowers can also contest the judgment if they have not been properly served and ask the court to vacate the  judgment

Is Bankruptcy Best For Me?

All in all consumers with outstanding collections, charge offs, judgments should do proper due diligence prior to filing bankruptcy.

  • Get free consultation from bankruptcy attorneys
  • Talk to mortgage lenders
  • Check the statute of limitations on your state
  • Bankruptcy is a great tool and a great federal law that protects a consumer against creditors
  • However, make sure that bankruptcy is the best option
  • Consumers who have older collections and many years have passed and the collection agencies are leaving them alone, maybe bankruptcy might not be the best option 

Home Buyers who need to qualify for a FHA Loan after Bankruptcy, whether it is Chapter 7 or Chapter 13, please contact The Gustan Cho Team at USA Mortgage at 262-716-8151 or email us at gcho@usa-mortgage.com. We are direct lenders with no lender overlays on government and conventional loans. We are available 7 days a week, evenings, weekends, and holidays.

Related> Mortgage After Chapter 13 Bankruptcy

Related> Mortgage Part Of Bankruptcy

Related> Qualifying For Mortgage After Bankruptcy And Foreclosure

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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