Gustan Cho The Mortgage Expert,
Publish On: March 17, 2024
This guide cover the FHA guidelines during vs after Chapter 13 Bankruptcy on FHA loans. VA and FHA guidelines during vs after Chapter 13 Bankruptcy is similar. You are eligible to qualify for a VA or FHA loan during Chapter 13 Bankruptcy one year after filing the Chapter 13 Bankruptcy. The major difference between VA and FHA loan when it comes to manual underwriting is VA loans require one year timely payments in the past 12 months to be eligible for a manual underwrite. HUD, the parent of FHA, require a two year timely payment history to become eligible for manual underwriting.
FHA and VA loans are the only two mortgage loan program that allow manual underwriting on home loans. There is no waiting period after Chapter 13 Bankruptcy discharged date on FHA and VA loans.
If the Chapter 13 Bankruptcy has not been seasoned two years after the discharge, it needs to be manual underwriting. We will be covering FHA guidelines during vs after Chapter 13 Bankruptcy on FHA loans on this blog. Whatever the HUD guidelines in Chapter 13 Bankruptcy on FHA loans are, it is similar with VA loans. VA and FHA guidelines state that borrowers can qualify for an FHA and VA loan during a Chapter 13 Bankruptcy repayment plan.
When Can I Qualify For an FHA Loan After Filing Chapter 13 Bankruptcy
Need to be one year into their Chapter 13 Bankruptcy with the approval and blessing of their Bankruptcy Trustee. VA and FHA Guidelines During Vs After Chapter 13 Bankruptcy state borrowers can qualify for home loans after a Chapter 13 Bankruptcy without any waiting period after the discharge date of Chapter 13. However, many borrowers are told that there is a one to two-year waiting period after a Chapter 13 Bankruptcy discharge date. Why is that? FHA Guidelines During Vs After Chapter 13 Bankruptcy is quite different. We will cover this common topic that often confuses borrowers. In this article, we will cover and discuss FHA Chapter 13 Guidelines and qualifying for FHA Loans during and after Chapter 13. Get qualify for an FHA loan after filing chapter 13 bankruptcy
FHA (Federal Housing Administration) guidelines for home loans can vary depending on whether the borrower has completed a Chapter 13 bankruptcy or is still in the process of doing so. Here’s a general overview:
FHA Guidelines During Chapter 13 Bankruptcy
Borrowers must typically wait at least 12 months after the Chapter 13 bankruptcy filing date before qualifying for an FHA loan. Borrowers must obtain court approval to take on new debt, including a mortgage, during the Chapter 13 repayment plan. Borrowers must have made all Chapter 13 payments on time for at least one year and may need to provide documentation to prove this.
The borrower’s credit report will be checked to ensure that there have been no new derogatory accounts or late payments since the bankruptcy filing.
Lenders will require proof of stable income to ensure the borrower can afford the mortgage payments alongside their Chapter 13 repayment plan obligations. Borrowers must provide extensive documentation, including proof of income, assets, and other financial obligations.
FHA Guidelines After Chapter 13 Bankruptcy Discharge
Borrowers typically need to wait at least two years after the discharge date of a Chapter 13 bankruptcy before they can qualify for an FHA loan with an approve/eligible per automated underwriting system. However, there is no waiting period requirements after Chapter 13 Bankruptcy discharge date on a manual underwriting.
Lenders will still check the borrower’s credit report to ensure no new derogatory accounts or late payments since the bankruptcy discharge.
Borrowers may need to meet minimum credit score requirements, which can vary but are often around 580 or higher for FHA loans. Proof of stable income will still be required to ensure the borrower can afford the mortgage payments. Similar to bankruptcy, borrowers must provide documentation of income, assets, and other financial obligations. It’s important to note that HUD mortgage guidelines during and after Chapter 13 Bankruptcy can vary depending on the lender and individual circumstances. Additionally, FHA guidelines are subject to change, so it’s essential to consult with a knowledgeable mortgage advisor or lender for the most up-to-date information and to determine eligibility.
Differences Between Chapter 7 Bankruptcy vs Chapter 13 Bankruptcy
There are two types of bankruptcies. HUD differentiates and has separate distinct qualification requirements for qualifying for FHA Loans during and after both types of bankruptcies. With FHA Guidelines During Vs After Chapter 13 Bankruptcy, there are many misunderstandings in qualifying for an FHA loan after a Chapter 13 Bankruptcy discharged date which we will discuss thoroughly.
Comparing HUD Bankruptcy Guidelines
We will compare FHA Guidelines During Vs After Chapter 13 Bankruptcy. We will discuss what Chapter 7 Bankruptcy is and the requirements for qualifying for FHA Loans with a Chapter 7 Bankruptcy. Chapter 7 Bankruptcy is called total liquidation. It benefits consumers who are overburdened in debt and has no or little income to ever pay their creditors. There is something called a Chapter 7 Bankruptcy means test.
Bankruptcy Means Test
Chapter 7 Means Test means that consumers need to qualify to file Chapter 7 Bankruptcy which means that a consumer cannot exceed a certain income limit. The purpose of a Chapter 7 Bankruptcy means test is to determine if income is low enough to be able to qualify to file a Chapter 7 Bankruptcy filing. It was created to make sure that consumers who have higher incomes from filing for a Chapter 7 Bankruptcy and file a Chapter 13 Bankruptcy instead where can pay back their creditors. If consumers fail to meet the Chapter 7 Bankruptcy means test, they need to file a Chapter 13 Bankruptcy Repayment Plan.
Qualify for FHA loan during or after for a mortgage loan if you have a charge-off
Cases Where You Cannot File Chapter 7 Bankruptcy
This is often the case for consumers making higher incomes than the median income for their geographical area. Chapter 13 Bankruptcy was designed for higher-income earners who need time to restructure their debts. Petitioners pay a portion of their income to their creditors, normally for 60 months. Whatever balance of debts that are left over after the 60 months is discharged by the Chapter 13 Bankruptcy Trustee. Borrowers can qualify for an FHA loan two years after a Chapter 7 Bankruptcy Discharged Date. No late payments after a Chapter 7 Bankruptcy discharged date and re-established credit are required to get an AUS APPROVAL.
HUD Chapter 13 Guidelines For FHA Loans
Here is what a Chapter 13 Bankruptcy is and the requirements for qualifying for FHA loans during and after a Chapter 13 Bankruptcy Repayment Plan. A Chapter 13 Bankruptcy is when a consumer has employment but needs the U.S. Bankruptcy Courts to help in restructuring their debts. Need to be employed to file a Chapter 13 Bankruptcy. A consumer who needs to file a Chapter 13 Bankruptcy needs to make a list of all of their creditors and list the debts they owe and what the minimum monthly payments are. The U.S. Bankruptcy Courts will assign a Chapter 13 Bankruptcy Trustee.
The Role of The Bankruptcy Trustee
Most Trustees are private attorneys who will oversee the whole Chapter 13 Bankruptcy process from filing through the repayment period and through the Chapter 13 Bankruptcy discharge. A portion of income is set aside to pay creditors. The Bankruptcy trustee sets aside a payment schedule to pay the creditors for a certain term.
After the consumer makes the timely payment for the term of the Chapter 13 Bankruptcy repayment period, which is normally 60 months, the Trustee will discharge most of the consumer’s overall delinquent debt.
The consumer will be debt free after the discharge date. HUD does not allow borrowers to qualify for an FHA Loan during a Chapter 7 Bankruptcy process prior to a Chapter 7 Bankruptcy discharged date. Need to wait two years to qualify for an FHA after a Chapter 7 Bankruptcy discharged date. It is different when qualifying for an FHA Loan with a Chapter 13 Bankruptcy. Borrowers can qualify for FHA loans during a Chapter 13 Bankruptcy repayment period prior to being discharged.
Waiting Period Requirements After Bankruptcy
Borrowers can qualify for an FHA Loan with no waiting period after your Chapter 13 Bankruptcy discharged date according to FHA Guidelines During Vs After Chapter 13 Bankruptcy. Borrowers can qualify for an FHA Loan During A Chapter 13 Bankruptcy Repayment Plan. This holds true as long as they have made twelve timely payments to their creditors that are made timely.
Need approval from the Chapter 13 Bankruptcy Trustee. This can only be done as a manual underwrite. With all manual underwriting, rental verification is required
Verification of Rent or Rental Verification is 12 months of canceled checks or 12 months of bank statements that the renter has paid their landlord. This is mandatory unless the renter has rented their apartment or home from a registered property management company. VOR form is provided by the lender to the property manager. It is completed, dated, and signed by the property manager. A VOR Form from the property management company can be used in lieu of 12 months on time canceled checks and/or 12 months on time bank statement bank statements. Click here to qualify for an FHA Loan with no waiting period after your Chapter 13 Bankruptcy
Shopping For Lender With No Overlays
Many of our viewers reading this BLOG is reading it because they probably were told they do not qualify for an FHA loan after a Chapter 13 Bankruptcy discharged date unless they wait a one or two-year waiting period. This is absolutely not true. HUD Guidelines in Qualifying for an FHA loan after a Chapter 13 Bankruptcy discharged date requires no waiting period.
Borrowers can qualify one year into a Chapter 13 Bankruptcy repayment period BUT DO NOT QUALIFY after the Chapter 13 Bankruptcy has been discharged without meeting the one-year to a two-year waiting period.
Does that make sense? Of course NOT. The one-year waiting period after a Chapter 13 Bankruptcy discharge date is not HUD Guidelines on Chapter 13 Bankruptcy. It is an overlay by the lender on FHA loans After the Chapter 13 Bankruptcy discharge date. There is no waiting period after Chapter 13 Bankruptcy discharge to qualify for an FHA loan under a manual underwrite. The reason it is a manual underwrite is because the borrower will not be able to get an approve/eligible per automated underwriting system without a two year seasoning after the discharge date.
Qualifying With a Lender With No Overlays Experienced in Chapter 13 Bankruptcy
Homebuyers shopping for a national five-star lender that has no overlays on FHA loans during and after Chapter 13 Bankruptcy, please contact us at Gustan Cho Associates at 262-716-8151. Text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.
