This guide covers the HUD Chapter 13 Guidelines on FHA loans. HUD Chapter 13 Guidelines on FHA loans during the Covid-19 pandemic have not changed. There is no waiting period after the Chapter 13 Bankruptcy discharged date to qualify for FHA loans Borrowers in an active Chapter 13 Bankruptcy repayment plan can qualify for an FHA loan without having the Chapter 13 Bankruptcy discharged. However, you must be in the Chapter 13 repayment plan for at least 12 months. Borrowers need to document they have made 12 months of timely payments to the bankruptcy Trustee with no late payments.

Borrowers can qualify for a purchase and refinance mortgage during the Chapter 13 repayment plan. Borrowers with home equity can do a cash-out refinance during the Chapter 13 repayment plan and pay off the 13 with the proceeds. The team at Gustan Cho Associates is getting countless calls from borrowers about why they are being told conflicting answers by other lenders about HUD Chapter 13 Guidelines on FHA loans.

Many are told that all lenders suspend manual underwriting during the coronavirus pandemic, which is not true. Others are told HUD Chapter 13 Guidelines on FHA loans during the Covid-19 outbreak have changed, which is untrue. Due to the pandemic, other borrowers are told all credit score requirements have increased from 660 to 680 on all FHA loans.

HUD Chapter 13 Guidelines on FHA Loans Post Coronavirus ERA

The bottom line is no changes to the HUD Chapter 13 Guidelines on FHA loans during and after the Covid-19 outbreak. Gustan Cho Associates is busier than ever taking FHA loan applications for borrowers in a current active Chapter 13. Gustan Cho Associates is one of the very few national lenders with no overlays on government and conventional loans. To qualify for a 3.5% down payment home purchase FHA loan, the borrower needs a 580 credit score. All FHA loans during Chapter 13 or recently discharged without a two-year seasoning need to be manual underwriting. Manual underwriting guidelines apply. Gustan Cho Associates are experts in FHA and VA manual underwriting.  This article will discuss and cover HUD Chapter 13 Guidelines on FHA loans during the Covid-19 pandemic.

HUD Chapter 13 Guidelines on FHA Loans Versus Lender Overlays

All lenders must ensure borrowers meet the minimum HUD Guidelines on FHA loans. However, lenders can have additional mortgage guidelines on FHA loans above and beyond the minimum HUD Guidelines. The additional lending requirements above and beyond HUD Chapter 13 Guidelines on FHA loans are called lender overlays. The coronavirus pandemic created turmoil in the secondary mortgage bond market, which created liquidity issues.

Investors on the secondary mortgage bond market do not want to take on risk by buying mortgage bonds of lower credit score borrowers. Lower credit score borrowers are often higher-risk borrowers. This is why investors have no appetite to buy mortgages of borrowers with less than 700 FICO.

This is also why lenders have increased minimum credit score requirements on government and conventional loans. Mortgage rates for borrowers under 700 FICO are high due to pricing adjustments. Not only are rates high for borrowers with under 700 credit scores, but many borrowers need to buy discount points. With no demand for borrowers under 700 credit scores, this setback is temporary until the mortgage markets stabilize. Economists and mortgage experts believe mortgage rates and the secondary mortgage bond market should stabilize in the coming months.

Not All Lenders Have The Same HUD Chapter 13 Bankruptcy Guidelines on FHA Loans

Most lenders have increased minimum credit score requirements from 660 to 680 during the coronavirus pandemic. The good news is Gustan Cho Associates has no lender overlays on FHA loans during the coronavirus pandemic. We still take mortgage loan applications from borrowers with under 620 credit scores. We are one of the few lenders that approve manual underwriting on FHA and VA loans.

Many lenders have halted and suspended doing manual underwriting on FHA loans during the coronavirus pandemic. Investors of the secondary mortgage bond market have no appetite for borrowers under 700 FICO during the pandemic due to liquidity issues.

Gustan Cho Associates has no lender overlays during the coronavirus pandemic. Helping borrowers qualify for a mortgage during the Chapter 13 repayment plan is our expertise. There is no waiting period after the Chapter 13 Bankruptcy discharge date. Most lenders will require a one-year to two-year waiting period after the Chapter 13 discharge date.

HUD Chapter 13 Guidelines on FHA Loans Versus Lenders With Overlays

Many borrowers have difficulties finding a lender to qualify for an FHA loan during the COVID-19 pandemic. As mentioned earlier, HUD did not change any guidelines on FHA loans during and after Chapter 13 Bankruptcy. However, most lenders have increased credit score requirements to 660 to 680 FICO.

Any borrowers in an active Chapter 13 or those with bankruptcy discharged and not seasoned for at least two years must be manual underwriting. Manual underwriting is considered riskier, and most lenders stopped doing it altogether. The great news is the team at Gustan Cho Associates is still taking mortgage loan applications on FHA manual underwriting.

Gustan Cho Associates has no waiting period after the discharge date on FHA and VA loans. To qualify for a mortgage with a national mortgage company with no lender overlays on government and conventional loans, please get in touch with us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.