FHA Loan After Foreclosure And Bankruptcy Pennsylvania

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FHA Loan After Foreclosure And Bankruptcy Pennsylvania

This BLOG On FHA Loan After Foreclosure And Bankruptcy Pennsylvania Was Written By Michael Gracz of Gustan Cho Associates Mortgage News

The Commonwealth of Pennsylvania is one of the fastest growing states in the United States. Home values throughout the state has been rising since 2013 with no sign of correction. With mortgage rates being the highest in ten years, there are still shortage of homes in the state of Pennsylvania.

The Federal Housing Administration, commonly known as FHA, is part of the United States Department of Housing and Urban Development.

  • FHA, a governmental agency, is not a lender
  • FHA has nothing to do with the origination, processing, underwriting, funding, and servicing of mortgage loans
  • What are FHA Loans then?
  • FHA Loans are residential mortgage loans that are insured by the Federal Housing Administration to approved private banks and mortgage companies
  • FHA insures banks and mortgage companies in the event borrowers on their home loans
  • FHA will partially cover the loss lenders take when borrowers default the property goes into foreclosure
  • However, all lenders needs to follow FHA lending guidelines in order for loans to be insurable by the Federal Housing Administration
  • Home buyers can qualify for FHA Loan After Foreclosure and Bankruptcy as long as they follow FHA guidelines after bankruptcy and foreclosure

Qualifying For FHA Loan After Bankruptcy

Home buyers can qualify for FHA Loan After Bankruptcy after two years from the discharge date of their Chapter 7 Bankruptcy.

  • The waiting period does not start until the actual discharged date of the Chapter 7 Bankruptcy and not the date the Bankruptcy was filed
  • FHA expects no late payments after the Chapter 7 Bankruptcy discharged date
  • Re-established credit after bankruptcy is required
  • Best way of rebuilding credit after filing a Chapter 7 Bankruptcy is by getting several secured credit cards
  • Three to five secured credit cards are recommended with at least a $500 credit limit can do wonders in raising credit scores and re-establishing credit

Home buyers can qualify for FHA After Chapter 13 Bankruptcy one year into the Chapter 13 Bankruptcy with the approval of the Bankruptcy Court.

  • The mortgage loan borrower needs to have been timely with all monthly scheduled payments to their creditors
  • Verification of rent will be required
  • VOR is required because qualifying for a mortgage loan after Chapter 13 Bankruptcy are all manual underwrites
  • If borrowers have no verification of rent and is living with family, a letter of explanation is required and a letter by the landlord family member stating the borrower is living rent free is required

Qualifying For FHA Loan After Short Sale

Home buyers can qualify for FHA Loan three years from the date of their short sale.

  • The waiting period date to qualify for FHA Loan After Short Sale starts from the date the HUD was signed and the short sale was closed
  • FHA expects no late payments after short sale and re-established credit from borrower and/or borrowers

Qualifying For FHA Loan After Foreclosure And Deed In Lieu Of Foreclosure

Home buyers can now qualify for FHA Loan After Foreclosure and Deed In Lieu Of Foreclosure three years from the recorded date of the foreclosure that is reflected on county records and/or the date of sheriff’s sale of the property.

  • Many homeowners who had a foreclosure and/or deed in lieu of foreclosure many years ago do not qualify for FHA Loan After Foreclosure or Deed In Lieu Of Foreclosure
  • This because they just turned in the keys to their lender but lender has not transferred the deed out of their names into the lender’s name
  • Here is a case scenario:
    • homeowner could have turned in their keys on January 1. 2010
    • lender did not sell the property until January 1, 2015
    • or did not transfer the deed out of the homeowner’s name into their names and recorded it on January 1, 2015
    • the three year waiting period did not start until January 1, 2015
    • homeowner will not be eligible to qualify for a FHA Loan until January 1, 2018

Mortgage Part Of Bankruptcy For FHA Loans

Borrowers with prior mortgage part of bankruptcy, there is a two year waiting period to qualify for a FHA Loan from the discharge date of the bankruptcy. Then there is a three year waiting period to qualify for a FHA Loan from the recorded date of the foreclosure.

  • Even though mortgage balance got discharged through Chapter 7 Bankruptcy, the waiting period will not start until lender has transferred the deed out of homeowners name into their name or until the home has sold

Mortgage Part Of Bankruptcy For Conforming & VA Loans

Borrowers with a prior mortgage part of bankruptcy, there is a four year waiting period to qualify for a conventional loan from the discharged date of Chapter 7 Bankruptcy. This holds true even though the foreclosure was recorded at a later date. Conventional guidelines on mortgage part of bankruptcy is quite different than qualifying for a FHA Loan After Bankruptcy.  Borrowers with a mortgage part of bankruptcy or need to qualify for a mortgage loan after foreclosure, deed in lieu of foreclosure, short sale, or bankruptcy, please contact Michael Gracz at Gustan Cho Associates at 630-659-7644 or text us for faster response. Borrowers can also email Mike Gracz at mgracz@gustancho.com. Michael Gracz has a national reputation of being able to do loans other lenders cannot because he has zero overlays on government and conforming loans.

1 Comment
  1. Gustan Cho, NMLS 873293 says

    Pennsylvania was one of the hardest hit states after the 2008 Great Recession and Real Estate Market Collapse. Countless of citizens of Pennsylvania lost their businesses and jobs where the end result was losing their homes. However, with the hot economy, Pennsylvania has fully recovered and is growing. Population grow is at an all time historical high and home values in Pennsylvania has been the highest since 2008. The highest mortgage rates in ten years has not affected Pennsylvania home buyers.

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