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
October 25, 2024Mixed-use properties combine residential and commercial spaces. Some borrowers applying for FHA home loans want to know if purchasing such a property using an FHA single-family home loan is possible. The FHA does allow the use of its loans for mixed-use properties, but certain conditions must be met.
October 24, 2024Buying your first home is a major milestone. If you use an FHA mortgage to buy your home, you’ll have two types of insurance to consider. One type is the FHA-required mortgage insurance premium, which is paid for 11 years or the loan's lifetime, depending on your down payment, loan term, and other variables.
October 22, 2024While the Federal Housing Administration sets rules for FHA loans, lenders retain some flexibility in determining interest rates, fees, and specific loan terms. Depending on circumstances, the FHA loan offered by your local bank might not be as competitive as one offered by a credit union or an online lender specializing in FHA products, or vice versa.
October 17, 2024Buying a home is one of the most significant investments Americans make. Understanding how to strengthen your credit profile and leverage the power of credit counseling is essential for successfully navigating the FHA loan process. What should you know about your credit to make the most of your home-buying journey?
March 13, 2024There are plenty of reasons to delay plans to refinance a home. One reason has made big headlines. When borrowers face higher interest rates than originally approved for, that is a good reason to wait to refinance.
