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
April 28, 2025Home loans have various expenses that aren't apparent to a new borrower until much later in the process. What do you need to consider when making your home loan budget? It might not be complete without addressing some of the issues we cover here.
April 23, 2025 While the prospect of lower interest rates or more favorable loan terms can be enticing, there are situations where waiting is the better option. Refinancing without carefully considering your current financial circumstances is never a good idea, but careful planning in the current financial environment is even more important.
April 22, 2025First-time home buyers worry about loan approval, but there are important steps to take to increase the likelihood that the lender will approve their application for the loan or pre-approval. What do you need to know before you choose a lender?
April 16, 2025There are smart uses for cash-out refinancing loan proceeds and uses for that money that may work against the borrower. We examine some of those choices below, starting with using an FHA cash-out refinance for investment purposes. Is this a good idea?
April 15, 2025House hunters sometimes face a curveball when the appraisal for a home they want to buy with an FHA mortgage is lower than the offer. Is this a deal-breaker? Believe it or not, it isn't the end of the road. A low appraisal can sometimes be just a bump in the road. In other cases, you may wish to walk away from the deal. Here's your game plan to navigate this situation...
