Using FHA Loans During Chapter 13 Bankruptcy To Purchase Home

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This ARTICLE On Using FHA Loans During Chapter 13 Bankruptcy To Purchase Home Was UPDATED And PUBLISHED On November 20th, 2020

Using FHA Loans During Chapter 13 Bankruptcy To Purchase Home versus waiting for discharge:

There are two different types of consumer bankruptcy:

  1. Chapter 7 Bankruptcy 
  2. Chapter 13 Bankruptcy

Chapter 7 Bankruptcy is called total liquidation.

Benefit Of Chapter 7 Bankruptcy Using FHA Loans During Chapter 13 Bankruptcy

Chapter 7 Bankruptcy is a Godsend for consumers who have substantial outstanding debts and cannot meet to satisfy those debts due to loss of job, reduction in income, loss of business, health issues, death, divorce, or other extenuating circumstances.

  • Chapter 7 is common for consumers who have no assets, no job, and need a fresh start in life
  • Consumers need to meet the Chapter 7 Bankruptcy Means Test to qualify for Chapter 7
  • Consumers with jobs that exceed a certain income level may not qualify for Chapter 7 Bankruptcy
  • They may need to file Chapter 13 Bankruptcy
  • Chapter 7 Bankruptcy is the favored type of bankruptcy for consumers
  • Most outstanding debts such as judgments, collections, charged-off accounts, and other debts are discharged in Chapter 7 Bankruptcy
  • It normally takes anywhere between 90 to 120 days from the filing date to get a discharge on Chapter 7 Bankruptcy
  • There is a two-year waiting period after Chapter 7 Bankruptcy to qualify for an FHA loan

Borrowers can purchase a home and qualify for an FHA loan two years after Chapter 7 Bankruptcy discharged date.

Can I Qualify For An FHA Loan During Chapter 13 Bankruptcy Repayment Plan

FHA and VA loans are the only two mortgage programs that allow borrowers to qualify for a home mortgage during Chapter 13 Bankruptcy repayment plan.

  • The Chapter 13 Bankruptcy does not have to be discharged
  • It needs to be a manual underwrite
  • FHA and VA loans are the only two mortgage program that allow manual underwriting
  • The difference between manual versus automated underwriting system approval is a cap on debt to income ratios and a human mortgage underwriter needs to manually underwrite the file
  • Per HUD’s manual underwriting guidelines, timely payments in the past 24 months is required
  • Timely payments throughout the repayment plan is required
  • Borrowers need to meet all minimum HUD Agency Mortgage Guidelines
  • Trustee approval is required
  • Many homebuyers are nervous about the bankruptcy trustee signing off on a new home purchase during Chapter 13 Bankruptcy
  • The team at Gustan Cho Associates have helped thousands of homebuyers close on a home during Chapter 13 Bankruptcy repayment plan
  • We never had a bankruptcy trustee not sign off on either a home purchase and/or a refinance mortgage loan during Chapter 13 Bankruptcy repayment plan

A large percentage of our clients at Gustan Cho Associates are folks who are planning on buying a home during Chapter 13 Bankruptcy repayment period. Chapter 13 Bankruptcy does not have to be discharged.

Benefit Of Chapter 13 Bankruptcy

What is Chapter 13 The Mortgage Bankruptcy Process

Chapter 13 Bankruptcy benefits consumers for those who have jobs and assets and do not qualify for Chapter 7 Bankruptcy:

  • Chapter 13 Bankruptcy is a debt reorganization payment plan administered by the Bankruptcy Courts through a Trustee
  • The trustee will take a percentage of the consumer’s income and use those proceeds to pay debts to creditors at a discounted rate
  • Chapter 13 Bankruptcy normally takes 60 months to get a final discharge

FHA and VA allow mortgage borrowers to qualify for a mortgage during Chapter 13 Bankruptcy Repayment Plan without the bankruptcy being discharged.

Chapter 13 Bankruptcy Mortgage Process

HUD, the parent of FHA, allows homebuyers to qualify for an FHA loan during Chapter 13 Bankruptcy repayment plan without waiting for the discharge

  • Bankruptcy Trustee Approval is required
  • All mortgage process during Chapter 13 Bankruptcy repayment plan needs to be manually underwritten
  • The only two home mortgage program that allows home buyers to purchase and/or refinance during Chapter 13 Bankruptcy Repayment Plan are FHA and VA loans
  • Both FHA and VA loans have similar home mortgage agency guidelines when it comes to qualifying for a mortgage during Chapter 13 Bankruptcy repayment plan
  • Both FHA and VA loans do not have any waiting period requirements after Chapter 13 Bankruptcy discharged date
  • However, if the Chapter 13 Bankruptcy discharged date has not been seasoned for two years, it needs to be a manual underwrite
  • This holds true for both FHA and VA loans
  • In order to qualify for an FHA and/or VA loan during Chapter 13 Bankruptcy repayment plan, you need to have been in a Chapter 13 Bankruptcy for at least 12 months
  • No late payments allowed during Chapter 13 Bankruptcy Repayment Plan
  • Trustee Approval is required
  • Getting trustee approval is no problem as long as the borrowers have the ability to repay their new mortgage payments
  • Most trustees will sign off on a home mortgage

In this article, we will discuss and cover Using FHA Loans During Chapter 13 Bankruptcy To Purchase Home.

How Difficult Is It Using FHA Loans During Chapter 13 Bankruptcy To Purchase Home

What is the difference between qualifying for an FHA loan during your Chapter 13 repayment and final write-off?

Many homebuyers think Using FHA Loans During Chapter 13 Bankruptcy To Purchase Home is very difficult.

  • Many are under the impression there will be a lot of red tape dealing with the courts in getting permission
  • This is not the case
  • A large percentage of our borrowers at Gustan Cho Associates are folks in a current active Chapter 13 Bankruptcy
  • Most Chapter 13 Bankruptcy repayment plans are 60 months
  • 60 months is five years
  • Five years is a long time to wait to purchase a home
  • Bankruptcy trustees consider buying a home during the Chapter 13 repayment plan is essential
  • The team at GCA Mortgage Group has never had a bankruptcy trustee not approve a home mortgage during Chapter 13 Bankruptcy repayment plan
  • Do not stress out getting a trustee approval for a mortgage

If you have any questions, please feel free to contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

Difference Between Qualifying For An FHA Loan During Chapter 13 Repayment Versus Final Discharge

There is not much difference qualifying for an FHA loan during Chapter 13 Bankruptcy repayment plan versus bankruptcy discharge.

  • The only difference is the borrower needs bankruptcy trustee approval and the file needs to be manually underwritten
  • Gustan Cho Associates are experts in helping homebuyers qualify for FHA and VA loans during and after Chapter 13 Bankruptcy
  • The team at GCA Mortgage Group are experts in manual underwriting on VA and FHA loans
  • Many borrowers are often scared about getting Trustee Approval for a mortgage
  • They should not be
  • The team at Gustan Cho Associates has never had an issue on a bankruptcy trustee not approving a home mortgage during Chapter 13 Bankruptcy repayment plan

The team at GCA Mortgage Group is proud to say that we close 100% of all our pre-approvals.

Qualifying For A Home Mortgage With A Lender With No Lender Overlays

How to qualify for a home mortgage with a lender without lender overlays

Gustan Cho Associates has no lender overlays on government and conventional loans. Over 75% of our borrowers are folks who either got denied by other lenders or could not qualify due to their lender overlays. GCA Mortgage Group also offers non-QM loans.  Gustan Cho Associates has a national reputation for being a one-stop mortgage shop due to being a no overlay lender on government and conventional loans as well as offering every non-QM loan program in today’s market. Our non-QM mortgage one day out of bankruptcy and foreclosure is one of our most popular mortgage programs. Bank statement mortgages benefit self-employed borrowers due to no income tax returns required. No doc stated income mortgages is back at Gustan Cho Associates. We now offer stated income mortgages. The only income document required is the borrower’s P and L statement signed off by the borrower’s CPA. No income tax returns required. The team at Gustan Cho Associates are experts in manual underwriting and have no lender overlays on government and conventional loans. To qualify for a home mortgage with a five-star national mortgage company licensed in multiple states with no lender overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. The team at GCA Mortgage Group is available 7 days a week, evenings, weekends, and holidays. Or email us at gcho@gustancho.com.

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