How to Qualify For an FHA Loan After Chapter 13 Bankruptcy?
In this article, we will discuss and cover the FHA Chapter 13 Bankruptcy Guidelines on purchasing and refinancing FHA loans. The housing market is booming. Home prices are now at a six-year high. Many homebuyers are being priced out of the market. Due to the skyrocketing home prices, the FHFA increased 2022 conforming loan limits to $647,200. This was the sixth increase of the conforming loan limits by the Federal Housing Finance Agency.
HUD Increases FHA Loan Limits Due to Increasing Home Prices
Normally, HUD follows the FHFA conforming loan limit announcement. HUD, the parent of FHA, is announced the 2022 FHA loan limit will increase to $420,680. The housing market has been increasing steadily over the years with no sign of a housing correction. Many market experts and analysts expect home prices to keep on increasing due to the strong demand of housing.
FHA Chapter 13 Bankruptcy Guidelines Repayment Plan
One of the driving forces for a strong housing market and rising home prices is historic low mortgage rates. The housing market is expected to remain strong. Home prices are continuously increasing with no sign of any correction. Homebuyers in the Chapter 13 Bankruptcy repayment plan are now available to qualify for an FHA loan just one year into the Chapter 13 repayment plan with trustee approval and manual underwriting.
The team at Capital Lending Network, Inc. never had an issue with a bankruptcy trustee not signing off on a home purchase during the Chapter 13 Bankruptcy repayment plan. There is no waiting period after the Chapter 13 Bankruptcy discharge date. However, if the discharge is not seasoned for at least two years, the file needs to be manually underwritten.
Qualifying For An FHA Loan During Chapter 13 Repayment Plan
Earlier this year, the Federal Reserve Board lowered interest rates to zero percent. The Central Bank is keeping interest rates at zero to make sure the economy does not deteriorate due to the coronavirus outbreak. The uncertainty of the harm the pandemic can do to the U.S. economy can trigger another major recession and an economic crisis in the U.S. The housing market remains strong and home prices is expected to increase. Many Americans were financially impacted by the coronavirus outbreak which shut the U.S. down in February 2020.
Despite The Coronavirus Outbreak, Home Prices Keep Surging
This holds especially true for small business owners. Many red states led by incompetent governors like Illinois, New York, California, and dozens of others are out of control with their power hunger in shutting down their states. The governors of Illinois, New York, and California have ordered a second round of ordering a lockdown and issuing another stay-at-home order. What this means is a shutdown of indoor businesses. Restaurants, bars, and cafes are ordered closed for the next thirty days due to the surge of positive COVID-19 cases. Many of these small business owners are financially hurting.
How To Not Get Priced Out of Booming Housing Market
Many Americans are expected to file bankruptcy due to the economic impact of the coronavirus outbreak. Over 50 million Americans filed for unemployment. Unemployment rates have skyrocketed and topped close to 20%. However, the COVID-19 economic recovery is faster than expected. The housing market remains strong despite the recovering economy.
FHA Loan During Bankruptcy Chapter 13 Repayment Plan
This second round of shutdown by these incompetent governors will bankrupt a large of small business owners. Many of them will file for bankruptcy. Bankruptcy rates are expected to soar. Chapter 13 Bankruptcy is a restructuring and reorganization repayment plan for those with assets like small business owners. It is a court-ordered repayment plan.
Normally, Chapter 13 Bankruptcy is for 60-month terms. A portion of the petitioner’s monthly wages is allocated to pay creditors of the Chapter 13 Bankruptcy petitioner. After the 60-month term is up, the remaining debts are discharged by the bankruptcy court. After the Chapter 13 Bankruptcy discharge, the petitioner is debt-free.
Qualifying For an FHA During Chapter 13 Repayment Plan
HUD, the parent of FHA, allows homebuyers to qualify for an FHA loan during the Chapter 13 Bankruptcy repayment plan. The bankruptcy does not have to be discharged to qualify for an FHA loan. Borrowers can qualify after one year after filing Chapter 13 Bankruptcy. This is great news for homebuyers needing to purchase a home during the Chapter 13 repayment plan. The way home values are skyrocketing and the historic low rates mean renters should consider purchasing a home sooner than later.
HUD Bankruptcy Mortgage Guidelines on Purchase and Refinance
Borrowers can qualify for an FHA loan after bankruptcy. Chapter 7 and Chapter 13 Bankruptcy are the two most common bankruptcy in the United States. There is a two-year waiting period after the Chapter 7 Bankruptcy discharged date. Borrowers in Chapter 13 Bankruptcy repayment plan are eligible to qualify for an FHA loan after one year of the filing date.
12 months of timely payments to the bankruptcy trustee is required. It needs to be a manual underwrite. There are no waiting period requirements after the Chapter 13 Bankruptcy discharged date. However, if the Chapter 13 Bankruptcy has not been seasoned for at least two years, the file needs to be under manual underwriting. HUD Manual Underwriting Guidelines apply.
Importance Of Reestablishing Credit After Bankruptcy
If you are planning on qualifying for a mortgage, do everything humanly possible so as not to be late during the Chapter 13 Bankruptcy repayment plan. Do not be late after your bankruptcy has been discharged. Any late payments during the Chapter 13 repayment plan and discharge date are the kisses of death. Most lenders will flat out deny you a mortgage if you had a single late payment during and/or after Chapter 13 Bankruptcy.
FHA Chapter 13 Bankruptcy Guidelines Waiting Period Requirements
There are specific waiting periods to qualify for a mortgage after a bankruptcy and foreclosure. Mortgage Part Of Bankruptcy Guidelines differs depending on loan programs. Fannie Mae Mortgage Part Of Bankruptcy Guidelines is much more liberal than the mortgage part of bankruptcy guidelines on government loans.
Waiting Period Start Date If You Have Bankruptcy and Foreclosure
Both Fannie Mae and government loan programs have different mortgage part of bankruptcy guidelines to qualify for residential mortgages. For FHA and VA loans there is a mandatory waiting period of two years after bankruptcy to qualify for a mortgage from the date discharge date of Chapter 7. There is a three-year waiting period after foreclosure, deed in lieu to qualify for FHA loans. The waiting period is two years after foreclosure, deed in lieu, and short sale to qualify for VA loans.
Waiting Period Guidelines On Conventional Loans On Prior Mortgage Included In Bankruptcy
There is a four-year waiting period to qualify for a conventional loan if borrowers have a mortgage part of the bankruptcy. The waiting period time clock starts from the discharge date of the bankruptcy. The minimum down payment required is a 5% down payment. No late payment after bankruptcy is normally allowed. Most mortgage lenders expect re-established credit. Mortgage included in bankruptcy cannot be reaffirmed. The housing event needs to be finalized.
Conventional Loan After Deed In Lieu And Short Sale
The traditional 2-year waiting period after a deed in lieu of foreclosure and short sale with a 20% down payment is no longer in effect as of August 2014. The new waiting period after a deed in lieu of foreclosure and a short sale is now 4 years from the recorded date of the deed in lieu of foreclosure and/or the date of the short sale. The minimum down payment now is 5% to qualify for a conventional loan after 4 years of deed in lieu of foreclosure and/or short sale.
Homebuyers With A Prior Mortgage Included In Chapter 7 Bankruptcy
Homebuyers with a prior mortgage included in Chapter 7 Bankruptcy have the following waiting period requirements:
- need to wait two years to qualify for an FHA loan from the discharge date of the bankruptcy
- three year waiting period from the recorded date of the foreclosure even though if the mortgage was included in the Chapter 7 bankruptcy
- The mortgage was included in bankruptcy and the mortgage loan balance was wiped off and charged off on bankruptcy
- The waiting period does not start until three years from the recorded date of the foreclosure and/or the date of the sheriff’s sale under the FHA Mortgage Part Of Bankruptcy Guidelines
The good news for conventional loans is Fannie Mae Mortgage Part Of Bankruptcy Guidelines is four years from the Chapter 7 Bankruptcy discharged date. The housing event does need to be finalized but the housing event date does not matter.
FHA versus Fannie Mae Guidelines on Prior Mortgages Included in Bankruptcy
The great news for borrowers who had mortgages included in Chapter 7 Bankruptcy. Fannie Mae Mortgage Part Of Bankruptcy Guidelines states the waiting period starts from the date of the bankruptcy discharge date. This is regardless of when the foreclosure, deed in lieu is recorded or when the date of the sheriff’s sale is. In general, if borrowers have a standard foreclosure, there is a 7-year waiting period from the recorded date of foreclosure to qualify for conventional loans. However, effective late this year 2014 and going into 2015, for borrowers with a prior mortgage part of bankruptcy, the waiting period start clock starts from the date of the bankruptcy discharge date.
Late Payments After Bankruptcy and Foreclosure
Capital Lending Network, Inc. has no lender overlays on FHA Chapter 13 Bankruptcy Guidelines. Borrowers with late payments after bankruptcy are commonly referred to as second offenders and not too many lenders want anything to do with them. However, one or two late payments after bankruptcy are not always a deal killer. The team at Capital Lending Network, Inc. has helped many borrowers with late payments after bankruptcy qualify for a mortgage.
To qualify for an FHA loan during Chapter 13 Bankruptcy or after the discharge date with a mortgage company licensed in multiple states with no lender overlays on government and conventional loans, please contact us at Capital Lending Network, Inc. at 800-900-8569 or text us for a faster response. Or email us at email@example.com The team at Capital Lending Network, Inc. is available 7 days a week, on evenings, weekends, and holidays.