Mortgage Loan After Filing Bankruptcy

As more borrowers that have previously filed bankruptcy come into the market to buy a home, a common question that mortgage brokers are getting is: “How do I get an FHA Loan after having filed bankruptcy?”.  Here are some common guidelines on waiting periods required by FHA, but there are always exceptions so it is important to talk to a mortgage broker with your specific situation and goals.

If a conventional loan was included in a Chapter 7 bankruptcy, the usual waiting period is 2 years, but some lenders may require a longer waiting period also known as a seasoning period. Note that the waiting period time starts from the date the bankruptcy was discharged not from the date filed.

Chapter 13:

FHA rules allow a lender to consider approving an FHA loan application from a borrower who is still paying on a Chapter 13 Bankruptcy-but only if those payments have been made and verified for a period of at least one year.

The borrower isn't automatically able to apply for a new FHA loan if they meet this requirement--the court trustee's written approval is a condition of the policy. Additionally, the borrower must write a detailed explanation of the bankruptcy and submit it with the loan application. The borrower must have good credit, a satisfactory employment history and other financial qualifications.

Chapter 7:

As mentioned above, all borrowers must wait least two years after the discharge date of a Chapter 7 Bankruptcy. The discharge date should not be confused with the date bankruptcy was filed.

As with Chapter 13 bankruptcy, FHA regulations demand a full explanation to be submitted with the FHA home loan application. To get a new FHA insured mortgage loan after Chapter 7, the borrower must qualify financially, establish a history of good credit in the wake of the filing of the Chapter 7, and meet other FHA requirements.

Other Loans:

VA Loans work on the same guidelines as FHA Loans. Conventional Loans have the longest waiting periods. Generally, the waiting period is four years after receiving a Chapter 7 discharge and two years after receiving a Chapter 13 discharge. If the Chapter 13 case was dismissed without a discharge the waiting period is four years from the date of the dismissal. USDA Loans require a waiting period of three years from the date of discharge for a Chapter 7 bankruptcy and 12 months of making Chapter 13 payment with court approval or from date of discharge of Chapter 13 bankruptcy.

For more information, contact out knowledgeable brokers at Loan People USA.


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