FHA Waiting Period After Bankruptcy And Foreclosure Guidelines

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FHA Waiting Period After Bankruptcy And Foreclosure Guidelines

This BLOG On FHA Waiting Period After Bankruptcy And Foreclosure Guidelines Was UPDATED On August 26th, 2018

FHA Waiting Period After Bankruptcy And Foreclosure

There are mandatory FHA Waiting Period After Bankruptcy And Foreclosure to qualify for FHA Loans. HUD Guidelines also has FHA Waiting Period After Short Sale to qualify for a FHA Loan.

  • HUD, parent of the Federal Housing Administration or FHA, is the federal agency that sets standards and writes and enforces FHA Guidelines on qualification requirements
  • The newest updated FHA Guidelines are in its most recent HUD 4000.1 FHA Handbook
  • The 4000.1 FHA handbook sets all of the FHA Guidelines
  • FHA Waiting Period After Bankruptcy And Foreclosure Guidelines require a mandatory 2 year waiting period after Chapter 7 Bankruptcy
  • Borrowers can qualify for FHA Loans one year into a Chapter 13 Bankruptcy Repayment Plan with Trustee Approval
  • There is a three year waiting period after foreclosure, deed in lieu of foreclosure, and short sale to qualify for FHA Loans
  • Home Buyers to be eligible to qualify for a 3.5% down payment FHA Loans, they need to meet a 580 credit score

FHA Waiting Period After Chapter 7 Bankruptcy Discharge

FHA Waiting Period After Chapter 7 Bankruptcy Discharge

A Chapter 7 Bankruptcy is also known a total liquidation where consumers who are overwhelmed with debts. Petitioners normally have no means to catch up and make debt payments. They can use this federal tool to ask the courts to discharge their debts where they can get a new fresh start on their financial life.

  • Main reason for consumers that file Chapter 7 Bankruptcy is because they lose their jobs and/or businesses
  • They no longer have an income source or a large reduction of their household income where they can no longer pay their debts
  • Other reasons for consumers that file Chapter 7 Bankruptcy is due to divorce
  • Medical reasons and debts where they have no way of catching up on their monthly debt payments with the income they are making or due to unemployment
  • A Chapter 7 Bankruptcy will discharge most debts including:
    • collection accounts
    • charge off accounts
    • civil judgments
    • tax liens
    • wage garnishments
    • personal debts
  • Debts that cannot be discharged through a Chapter 7 Bankruptcy are the following debts:
    • government debts
    • federal backed student loans
    • tax liens
    • fines owing to the government
    • child support payments
    • alimony payments
    • federal taxes
    • state taxes
    • county and local taxes
    • fines imposed by any local, county, state, and federal government agencies
  • Home Buyers can qualify for a FHA Loan in just two years after a Chapter 7 Bankruptcy discharge
  • No late payments or derogatory credit after their Chapter 7 Bankruptcy
  • A minimum of 580 credit score is required to qualify for a 3.5% down payment FHA home purchase loan after a Chapter 7 Bankruptcy
  • Home Buyers with credit scores under 580 credit scores can qualify for a FHA Loan after a Chapter 7 Bankruptcy as long as they have 10% down payment and compensating factors
  • Mortgage lenders like to see borrowers with a prior Chapter 7 Bankruptcy to have re-established credit after Chapter 7 Bankruptcy and frown upon late payments after a Chapter 7 Bankruptcy
  • Late payments after bankruptcy and/or housing event are not deal killers as long as borrowers can get approve/eligible per Automated Underwriting System Findings

FHA Waiting Period After Chapter 13 Bankruptcy

FHA Waiting Period After Chapter 13 Bankruptcy

A Chapter 13 Bankruptcy is also called a debt restructuring plan. Consumers gets appointed a Chapter 13 Bankruptcy Trustee. The Trustee will go over the income of the petitioner of the Chapter 13 Bankruptcy and allocate a portion of their income to creditors. Trustee will allocate that portion to the list of the petitioners creditors for a period of time, which is normally between three to five years.

  • After the repayment plan is over, the remaining debts owed to consumer’s creditors are discharged or wiped off
  • Consumer is debt free after the Chapter 13 Bankruptcy discharge where they can restart their financial life
  • In order to qualify for a Chapter 13 Bankruptcy, the petitioner needs to be employed with documented income
  • Unemployed people will  not qualify for a Chapter 13 Bankruptcy
  • A consumer who filed a Chapter 13 Bankruptcy can qualify for a FHA Loan one year into the Chapter 13 Bankruptcy
  • Borrowers need to  provide they have been timely with all of their payments to their creditors for the past 12 months
  • Approval of the Chapter 13 Bankruptcy Trustee

A consumer who just had a Chapter 13 Bankruptcy discharged can qualify for a FHA Loan right after the Chapter 13 Bankruptcy discharged date with no waiting period.

  • However, if the Chapter 13 Bankruptcy discharge has been less than two years, then the FHA Loan needs to be a manual underwriting
  • Any Chapter 13 Bankruptcy FHA Loan applications with less than two years of the discharge date will not get an approve/eligible per DU FINDINGS

FHA Waiting Period After Foreclosure, Deed In Lieu Of Foreclosure, Short Sale

FHA Waiting Period After Foreclosure, Deed In Lieu Of Foreclosure, Short Sale

There is a three year waiting period after the recorded date or the date of the sheriff’s sale of a foreclosure and/or deed in lieu of foreclosure to qualify for FHA Home Loans.

  • There is a three year waiting period to qualify for a FHA Loan from the date of a short sale
  • There is a three year waiting period from the date of a mortgage charge off and/or second mortgage charge off to qualify for a FHA Loan
  • Lenders do not want to see any late payments after a foreclosure, deed in lieu of foreclosure, or short sale
  • If borrowers with any late payments after a bankruptcy and/or housing event are told they do not qualify for a FHA Loan, please contact us at 262-716-8151 or email us at gcho@gustancho.com

We are available 7 days a week, evenings, weekends, and holidays to take your phone calls and answer any questions.

Mortgage Rates With A Prior Bankruptcy And Foreclosure

Mortgage Rates With A Prior Bankruptcy And Foreclosure

Many borrowers think that they will be paying a higher mortgage rate due to a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.

  • This is not true
  • Prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale has nothing to do with mortgage rates, in both FHA Loan Programs, and Conventional Loan Programs
  • The main factor that dictates mortgage rates on FHA Loans are credit scores
  • With Conventional Loans, credit scores and loan to value are the indicators of mortgage rates
  • A prior bankruptcy or foreclosure has no bearing on what interest rates the borrower gets
  • There are no pricing adjustments for a prior bankruptcy or foreclosure on the mortgage rates

This BLOG On FHA Waiting Period After Bankruptcy And Foreclosure was written by Gustan Cho and updated on August 26th, 2018

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