FHA Loan After Chapter 7 Bankruptcy Mortgage Guidelines

This article covers FHA Loan after Chapter 7 Bankruptcy Mortgage Guidelines.

Homebuyers can qualify for a mortgage after bankruptcy. Here are the bullet points we are going to cover:

  • HUD guidelines on FHA loans after bankruptcy
  • The importance of re-establishing credit after bankruptcy
  • Eligibility requirements after bankruptcy

Government and conventional loans require a mandatory waiting period after bankruptcy. Non-QM loans one day out of bankruptcy does not have waiting period requirements. However, a 30% down payment is required.

Qualifying for an FHA Loan after Bankruptcy

Home Buyers can qualify for an FHA loan After Chapter 7 Bankruptcy after a two-year waiting period after the discharged date of their Chapter 7 Bankruptcy.

A Chapter 7 Bankruptcy offers consumers a fresh start in their financial life. A Bankruptcy will wipe out most debts a consumer has and will put a halt to all collection activities and procedures.

Bankruptcies will discharge most debts like collection accounts, judgments, charge-offs, secured debts, personal debts, and unsecured debts. The things that cannot be discharged with a Chapter 7 Bankruptcy are government debts such as tax liens, court-ordered child support and/or alimony payments, and government-backed student loan debts.

Debt incurred due to fraud cannot be discharged with a Chapter 7 Bankruptcy. The great news with a Chapter 7 Bankruptcy is that the consumer will be debt-free and there is life after filing for a Chapter 7 Bankruptcy.

Consumers can qualify for new credit such as auto loans, and mortgage loans after a Chapter 7 Bankruptcy.

Re-establishing Credit After Bankruptcy To Qualify For A Mortgage

There are many instances where consumers can get credit scores of higher than 700 FICO one year after Chapter 7 Bankruptcy discharged date with proper re-establishing of their credit:

Right after you file a Chapter 7 Bankruptcy, your credit scores will plummet more than 150 FICO points. However, that sudden drop is temporary.

Even if you do nothing to re-establish credit and improve credit scores, consumer credit scores will naturally rise over time. The drop after filing for Chapter 7 Bankruptcy is like having a major hangover.

As time passes, your hangover will recover and so will credit and credit scores. As time passes and the Chapter 7 Bankruptcy ages on the credit report, it will have less of an impact on credit scores.

Again, the great news is that homebuyers can now qualify for an FHA loan After Chapter 7 Bankruptcy just after two years of the Chapter 7 Bankruptcy Discharge Date.

Preparing For FHA Loan After Chapter 7 Bankruptcy

The minute Chapter 7 Bankruptcy is discharged, they should start re-establishing their credit.

The fastest and easiest way of re-establishing credit is by getting three to five secured credit cards. The sooner you get several secured credit cards, the better off you will be.

This is because having aged credit tradelines is one of the most important factors that will provide you with a strong credit profile. Mortgage lenders consider having aged multiple credit tradelines as compensating factors.

Make sure to never be late after Chapter 7 Bankruptcy discharged date. No late payments after bankruptcy. Many lenders will not approve anyone who had any late payments after a bankruptcy and/or foreclosure.

Lenders expect timely payments on all credit obligations after a bankruptcy and/or foreclosure. One late payment can be a reason for credit denial.

FHA Loan After Chapter 13 Bankruptcy Mortgage Guidelines

What are the mortgage guidelines in the event of bankruptcy

Borrowers can qualify for FHA Home Loans one year into their Chapter 13 Bankruptcy Repayment Plan.

  • Borrowers need to be in the repayment plan for 12 months.
  • Chapter 13 Bankruptcy does not have to be discharged. It needs to be manual underwriting

Over 30% of our borrowers at Gustan Cho Associates are folks who are in a current Chapter 13 Bankruptcy repayment plan. Trustee approval required. There is no waiting period to qualify for FHA Loans after the Chapter 13 Bankruptcy discharged date.

Gustan Cho Associates has no overlays on government and conventional loans.

Importance of Verification of Rent

Renters renting an apartment or home, make sure to make all rental payments with a check:

Cash paid the rent with a receipt is not valid. VOR is only valid by providing 12 months of canceled checks paid to the landlord. To qualify for an FHA loan After Chapter 7 Bankruptcy, borrowers need a minimum credit score of 580 FICO credit scores.

However, if credit scores are under 620 FICO credit scores, the lender may ask for verification of rent. Renters renting from a property management company can have the property manager complete a VOR form in lieu of providing canceled checks.

VOR Form provided by the lender signed by the property management company is valid with no proof of payment. 12 months canceled checks and/or 12 months bank statements is not required with a signed VOR form.

Lenders With No Overlays On FHA Loan After Chapter 7 Bankruptcy

How to get a Chapter 7 FHA Loan With no overlays

Borrowers looking for an FHA Loan After Chapter 7 Bankruptcy and are looking for a lender with no investor overlays, contact us at Gustan Cho Associates at 262-716-8151. Or text us for a faster response. Or email us at [email protected] We do not have any FHA Investor Overlays and just go off the automated findings of the Automated Underwriting System. We are available 7 days a week, evenings, weekends, and holidays.

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