FHA Loan Rules for Borrowers After Filing Bankruptcy
August 10, 2023
Waiting Periods
For Chapter 7 Bankruptcy, borrowers may be eligible for an FHA loan two years after the discharge of the bankruptcy. For Chapter 13 Bankruptcy, borrowers can be eligible for an FHA loan after making 12 on-time payments as part of a repayment plan and receiving permission from the bankruptcy court.
Credit Requirements
After bankruptcy, borrowers should work on rebuilding their credit. A minimum credit score may be required by the lender or FHA. Most lenders typically prefer a score of 580 or higher. However, some may consider borrowers with lower scores on a case-by-case basis with different down payment requirements.
Financial Stability
Lenders will evaluate your financial stability, including your income, employment history, and any post-bankruptcy financial issues. Demonstrating responsible financial behavior and a stable income can increase your chances of loan approval.
Bankruptcy Discharge
Ensure that you have received a discharge from the bankruptcy court. You'll need to provide documentation of this to your lender.
Housing Counseling
FHA may require borrowers with recent bankruptcies to participate in housing counseling programs to ensure they are informed about the responsibilities of homeownership.
Foreclosure
If you've experienced a foreclosure in addition to bankruptcy, separate waiting periods may apply.
Lender Discretion
Lenders have some discretion in their underwriting guidelines, so it's essential to work with an FHA-approved lender who can guide you through the process and provide insights based on your specific situation.
------------------------------
RELATED VIDEOS:
Learn How to Meet FHA Requirements
A Few Tips About Your Fixed Rate Mortgage
Your Proof of Ownership Is the Property Title
FHA Loan Articles
January 10, 2022A home loan is one of the most important investments you can make. Buying a home means owning property, and being a homeowner means there's potential to watch your investment grow in value over time. But first, the lender has to make sure the borrower is a good credit risk.
December 9, 2021This wait isn’t easy when you've been shopping for a new home. But getting a home inspection is a crucial step, and not one you should consider skipping. Make sure you hire a reliable home inspector, wait for your inspection report, and watch out for these red flags.
November 2, 2021Interest rates started to decline in 2019 and still seem considerably low. The average rate for a 30-year, fixed rate home loan has fallen from 4.94% in November 2018 to 3.13% in October 2021. A point drop in your interest rate could translate to huge savings with each monthly payment
October 30, 2021The FHA Rehabilitation Loan program allows lenders to cover the purchase or refinance, as well as the rehabilitation of the home, as part of a single mortgage. This loan can be used to finance a property that is at least one year old with a total cost of repairs amounting to at least $5,000
October 16, 2021The FHA’s aim is to make homeownership more affordable and accessible for Americans, and it has been doing so for decades. It insures home loans made by FHA-approved lenders so borrowers can purchase single-family and multi-family homes in the US and its territories.
