FHA Loan During Chapter 13 Bankruptcy in Arizona: How to Get Approved in 2025
Buying a home while navigating Chapter 13 Bankruptcy might seem daunting, but here’s some good news—you can qualify for an FHA loan during Chapter 13 Bankruptcy in Arizona. Many lenders say you need to wait until your bankruptcy is discharged, but that’s not true.
At Gustan Cho Associates, we help borrowers get approved without lender overlays, even during an active Chapter 13 repayment plan.
If you make on-time payments in your Chapter 13 plan and have trustee approval, you could qualify after 12 months. This guide will break down everything you need about FHA loans during Chapter 13 Bankruptcy in Arizona, including 2025 updates, Arizona-specific lending insights, and steps to get approved faster.
Can You Get an FHA Loan During Chapter 13 Bankruptcy in Arizona?
Yes! You can get an FHA loan during Chapter 13 Bankruptcy in Arizona. You don’t have to wait until your bankruptcy is finished. However, there are some important rules you need to follow to qualify.
- You must be at least 12 months into your repayment plan
- All trustee payments must be made on time (no late payments)
- You need written approval from your Chapter 13 trustee
- Your mortgage must go through manual underwriting
- Your debt-to-income (DTI) ratio must be within FHA limits
In Chapter 13 Bankruptcy? You May Still Qualify for an FHA Loan in Arizona
Apply Online And See If You Qualify for an FHA Loan in Arizona
What’s Changed for 2024-2025?
- More lenders are tightening overlays, but Gustan Cho Associates has zero overlays, meaning we approve loans others won’t.
- Arizona’s housing market is competitive, so getting pre-approved early gives you a stronger position when making offers.
- Interest rates fluctuate, but FHA loans offer lower rates than many non-QM loan alternatives.
Chapter 13 vs. Chapter 7 Bankruptcy: Why It Matters
There are two types of bankruptcy most borrowers deal with: Chapter 7 and Chapter 13.
- Chapter 7 Bankruptcy is the total liquidation of debt. If you filed for Chapter 7, you must wait two years after discharge to qualify for an FHA loan. Once Chapter 7 has been discharged, consumers are debt-free and can restart rebuilding their credit.
- Chapter 13 Bankruptcy is when you work out a plan to pay back some of your debt over three to five years. If you’re in this situation, you can still get an FHA loan during Chapter 13 Bankruptcy in Arizona after making payments for at least a year.
If you are in Chapter 13 Bankruptcy in Arizona, you don’t have to wait years to become a homeowner—you just need to follow the right steps.
Arizona-Specific FHA Loan Considerations During Chapter 13 Bankruptcy
Every state has different lending practices. Here’s what you need to know about FHA loan during Chapter 13 Bankruptcy in Arizona:
- Trustee Approval is Almost Always Granted – Arizona bankruptcy trustees generally approve mortgage applications as long as the home is affordable.
- Manual Underwriting is Required – FHA requires manual underwriting for Chapter 13 borrowers, meaning a human underwriter will carefully review your financial situation.
- Arizona’s Cost of Living is Rising – As of 2024, home prices in Phoenix, Tucson, and Mesa are still increasing. Qualifying sooner means locking in better deals before prices go up.
- Some Lenders Have Overlays – Not all lenders allow FHA loan during Chapter 13 Bankruptcy in Arizona, but Gustan Cho Associates does!
How to Qualify for an FHA Loan During Chapter 13 Bankruptcy in Arizona
If you’re looking to get an FHA loan during Chapter 13 Bankruptcy in Arizona, here are five easy steps to help you get approved:
Step 1: Make 12 On-Time Bankruptcy Payments
Lenders want consistent, on-time payments in your Chapter 13 repayment plan. Any missed or late payments can disqualify you.
Step 2: Get Trustee Approval
Your bankruptcy trustee must provide a written letter of approval stating that taking out a mortgage fits within your repayment plan. Most trustees approve if:
- You are financially stable.
- The new mortgage payment is affordable.
- The home helps with long-term financial security.
Step 3: Improve Your Credit Score
If you’re looking into getting an FHA loan during Chapter 13 Bankruptcy in Arizona, it’s important to know a few things about credit scores. You can qualify for an FHA loan with a FICO score as low as 580, but if your score is 620 or higher, you might get better interest rates and a smoother approval process. Remember, if your score is below 580, you’ll need to put down at least 10% instead of the usual 3.5%. Knowing this can help you prepare better for your loan application.
Step 4: Work with a Lender Who Has No Overlays
Most banks and mortgage lenders have lender overlays that add extra restrictions beyond FHA guidelines. Gustan Cho Associates has no overlays, meaning we only follow HUD rules.
Step 5: Prepare for Manual Underwriting
Since automated underwriting does not approve an FHA loan during Chapter 13 bankruptcy in Arizona, your file must go through manual underwriting. This means:
- Your DTI ratio should be below 50% (or up to 55% with compensating factors).
- You need to show strong income stability.
- You should have reestablished credit (at least one or two new trade lines).
Bonus Tip: If you have collections, charge-offs, or other debts, our team can help you navigate what needs to be paid off and what doesn’t.
Common Lender Overlays on FHA Loans During Chapter 13 Bankruptcy
Not all lenders follow FHA guidelines the same way. Here are some common overlays you may run into:
🚫 Some lenders require a 620+ credit score (FHA only requires 580 for 3.5% down).
🚫 Many lenders won’t approve a loan until 2 years after Chapter 13 discharge (FHA has no waiting period).
🚫 Higher DTI requirements – Some lenders cap DTI at 45%, but FHA allows up to 55% with compensating factors.
🚫 No manual underwriting – Some lenders don’t do manual underwriting, which is required for Chapter 13 borrowers.
✅ Solution: If you’re looking for an FHA loan during Chapter 13 Bankruptcy in Arizona, finding a lender who sticks to HUD rules without adding extra restrictions is important. Gustan Cho Associates is a great choice because they specialize in helping borrowers navigate these challenges. They understand the process and can guide you through getting your loan approved.
No Need to Wait! You Could Qualify for an FHA Loan in Arizona After 12 Months of On-Time Payments
Apply Online And Get recommendations From Loan Experts
Get Approved for an FHA Loan During Chapter 13 Bankruptcy in Arizona
Don’t let bad information keep you from owning a home. If you’ve been making your Chapter 13 payments on time, you may qualify for an FHA loan in Arizona right now.
At Gustan Cho Associates, we specialize in helping borrowers in Chapter 13 Bankruptcy get approved for a mortgage—even when other lenders say no.
📞 Call us at 800-900-8569
📱 Text us for a faster response
📩 Email us at alex@gustancho.com
💻 Click here to get a fast quote!
Don’t wait—start your homeownership journey today!
Frequently Asked Questions About FHA Loan During Chapter 13 Bankruptcy in Arizona:
Q: Can I Really Get an FHA Loan During Chapter 13 Bankruptcy in Arizona?
A: Yes! You don’t have to wait until your bankruptcy is discharged. As long as you’ve been on the repayment plan for at least 12 months, have made all payments on time, and have gotten trustee approval, you can qualify for an FHA loan during Chapter 13 bankruptcy in Arizona.
Q: Should I Wait Until My Chapter 13 is Discharged to Buy a House?
A:No! Many people think you must wait until Chapter 13 is over, but that’s not true. FHA allows borrowers to buy a home while still in bankruptcy if you meet their requirements.
Q: What Credit Score do I Need for an FHA Loan During Chapter 13 Bankruptcy in Arizona?
A: FHA allows a minimum 580 credit score with 3.5% down. If your score is below 580, you’ll need a 10% down payment instead. Some lenders have stricter rules, but Gustan Cho Associates follows FHA guidelines with no extra requirements.
Q: What if I had a Late Payment in My Chapter 13 Repayment Plan?
A: Late payments can be a big issue. If you missed a payment, your FHA loan approval could be delayed. However, every situation is different, and we can help you find a solution based on your financial history.
Q: Will My Bankruptcy Trustee Allow Me to Get an FHA Loan?
A: Yes, most Arizona trustees approve FHA loans if you’ve been making on-time payments and the new mortgage is affordable. We can help you get trustee approval as part of the loan process.
Q: Do All Lenders Allow FHA Loans During Chapter 13 Bankruptcy in Arizona?
A: No! Some lenders add extra rules (lender overlays) and won’t approve FHA loans during Chapter 13. Gustan Cho Associates has no overlays, so we only follow HUD’s rules, making it easier for you to qualify.
Q: How Much Home Can I Afford in Chapter 13 Bankruptcy?
A: This depends on your income, debt-to-income (DTI) ratio, and credit score. FHA allows DTI up to 55% if you have strong compensating factors like savings or rental history. We can help you calculate your home affordability.
Q: What Documents do I Need to Apply for an FHA Loan During Chapter 13 Bankruptcy in Arizona?
A: To apply, you’ll need:
- Trustee approval letter
- Pay stubs or proof of income
- Tax returns & W-2s (last two years)
- Bank statements (last two months)
- Proof of on-time bankruptcy payments
Q: How Long Does it Take to Get Approved for an FHA Loan During Chapter 13 Bankruptcy in Arizona?
A: If you have trustee approval and all the documents ready, closing on a home can take 30 to 45 days. Some borrowers close even faster with manual underwriting.
Q: How do I Start My FHA Loan During Chapter 13 Bankruptcy in Arizona?
A: Simple! Call or text Gustan Cho Associates at (800) 900-8569, text us for a faster response, or click here for a fast quote! We specialize in helping borrowers get approved—even when other lenders say no!
This blog about “FHA Loan During Chapter 13 Bankruptcy in Arizona ” was updated on February 12th, 2025.
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