FHA Loan After Bankruptcy Mortgage Guidelines On Home Purchases

This BLOG On FHA Loan After Bankruptcy Mortgage Guidelines On Home Purchases Was UPDATED And PUBLISHED On July 1st, 2020

What are the FHA bankruptcy loans guidelines for home purchases

Both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy give consumers a fresh start in life either by getting their debts discharged or by reorganizing their debts into a repayment plan which they can afford and not be overwhelmed with the court’s approval.

  • For those who do not have little to no assets and not enough or no income can qualify for a Chapter 7 Bankruptcy which enables them to completely wipe out their debts
  • Filers can start their life over again with no worries of debt collectors, wage garnishments, or their bank accounts being frozen

In this article, we will discuss and cover FHA Loan After Bankruptcy Mortgage Guidelines On Home Purchases.

Chapter 13 Bankruptcy Repayment Plans

For consumers who have assets and have income but are just too overwhelmed with debts, they can qualify for a Chapter 13 Bankruptcy which is a debt reorganization and restructuring program

  • A percentage of the consumer’s monthly income is set aside wherewith those proceeds, the creditors get paid
  • With Chapter 13 Bankruptcy, the consumer enters into a 3 to 5-year repayment plan and after they complete the repayment plan, the remaining balance of their debts get discharged and they no longer are responsible for any debts

Homebuyers can qualify for FHA after bankruptcy as long as they complete the minimum waiting period after Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.

UD Guidelines On Chapter 7 Bankruptcy

Homebuyers can qualify for an FHA Loan After Bankruptcy if they had a Chapter 7 Bankruptcy after a two year waiting period from their discharge date. Borrowers need re-established credit and a 580 minimum credit score with a 3.5% down payment.

  • Lenders want to see no late payments after their Chapter 7 Bankruptcy discharge date and want to see re-established credit

HUD Guidelines On Chapter 13 Bankruptcy

What are the HUD guidelines for Chapter 13 Bankruptcy?

Homebuyers can qualify for an FHA Loan After Bankruptcy if they had a Chapter 13 Bankruptcy after one year into the Chapter 13:

  • This holds true as long as they have been timely with all of their scheduled payments to their creditors and with the approval of their Chapter 13 Bankruptcy Trustee
  • If the home buyer has a Chapter 13 Bankruptcy discharge, then there is no waiting period
  • FHA Loan after Chapter 13 Bankruptcy either during Chapter 13 or with less than 2 year wait period after discharged date need to be manually underwritten

Borrowers will need a lender that is able to do manually underwriting.

Importance Of Timely And Reestablished Credit During And After Bankruptcy

Re-established credit is required and no late payments after the Chapter 13 Bankruptcy are required:

  • Verification of rent is required on all manual underwriting
  • One month of PITI reserves is required

No late payments in the past 12 months, preferably the past 24 months.

Re-Established Credit Required For FHA Loan After Bankruptcy

Lenders will want to see that the FHA mortgage loan borrower has re-established credit after bankruptcy and that they have been timely with all of their credit payments since the bankruptcy.

  • Late payments after bankruptcy can be a major issue when qualifying for an FHA Loan After Bankruptcy
  • The quickest and easiest way of re-establishing credit after bankruptcy is by getting several secured credit cards
  • Secured credit cards are the same as regular unsecured credit cards except they require the consumer to put a deposit
  • The secured credit card company will issue a credit limit equivalent to the deposit
  • There are an initial membership fee and annual membership fee for secured credit cards like standard unsecured credit cards

Secured credit card companies will report payment history to all three credit reporting agencies including late payments so never be late on any monthly payments.

Qualify For FHA Loan After Bankruptcy Now

How to Qualify for an FHA Bankruptcy Loan

Michael Gracz of Gustan Cho Associates is author of Qualifying For FHA Loan After Bankruptcy. Mike Gracz is an associate contributing editor for Gustan Cho Associates Mortgage News. Michael Gracz is also the National Sales Manager for Gustan Cho Associates Mortgage Group and a national expert on government and conventional loans. Mike Gracz has a national reputation for being able to originate and fund mortgages other lenders cannot due to Gustan Cho Associates’ national no overlays business model.

Borrowers with a prior bankruptcy and need to qualify for an FHA Loan with a national direct lender with no overlays on government and conventional loans can contact Michael Gracz at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected]  Homebuyers can also apply online by clicking APPLY NOW. We are one of a few national direct lenders with zero overlays on FHA, VA, USDA, and Conforming Loans. Mike Gracz is also an expert on non-QM loans and bank statement loans for self-employed borrowers.

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