FHA Chapter 13 Bankruptcy Guidelines

This guide covers FHA Chapter 13 Bankruptcy Guidelines on FHA loans. FHA and VA are the only two home mortgage programs that allow borrowers to qualify for a mortgage during the Chapter 13 Bankruptcy repayment plan.  However, most lenders do not want to touch anyone during their Chapter 13 Repayment plan even though HUD and the VA say there is no problem. As far as I know, no non-QM wholesale lenders will finance anyone while in a Chapter 13 Bankruptcy.

There is no waiting period after Chapter 13 Bankruptcy discharge date to qualify for a VA or FHA loan. However, if the Chapter 13 Bankruptcy has not been seasoned two years, the file needs to be a manual underwrite.

Borrowers in an active Chapter 13 Bankruptcy repayment plan can qualify for an FHA loan during the repayment plan without Chapter 13 being discharged with Trustee Approval. You need to wait one year after filing Chapter 13 Bankruptcy with timely payments for you to be eligible to qualify for a mortgage loan. The following paragraphs cover the FHA Chapter 13 Bankruptcy Guidelines on FHA home loans.

FHA Chapter 13 Bankruptcy Guidelines on Trustee Approval

To be eligible for an FHA loan while on a Chapter 13 Bankruptcy repayment plan, the borrower needs to have been in the plan for one year. The borrower must have made twelve timely payments after filing Chapter 13 Bankruptcy. The borrower needs to get bankruptcy trustee approval so the trustee feels confident the borrower can repay the loan.

The Bankruptcy Trustee needs to approve the new housing payment and confirm the borrower is notliving beyond their means. The bankruptcy trustee needs to confirm the new housing payments are manageable.

The trustee needs to feel confident the borrower can repay the loan without stress.  Preferred Mortgage Rates has never had a case where the bankruptcy trustee did not approve a home purchase and mortgage during the Chapter 13 bankruptcy repayment plan. However, the borrower must be in the Chapter 13 repayment plan for 12 months before qualifying. Timely payments during the Chapter 13 repayment plan are required.

FHA Chapter 13 Bankruptcy Guidelines After Discharged Date

Manual underwriting guidelines apply. Homebuyers can qualify for FHA home loans during a Chapter 13 Bankruptcy repayment plan without the bankruptcy being discharged. There are no waiting period requirements after the Chapter 13 Bankruptcy discharge date. If the Chapter 13 Bankruptcy has not been discharged for two years, it must be manually underwritten. We will discuss more on manual underwriting more in the next paragraph.

FHA Chapter 13 Bankruptcy Guidelines allow borrowers to qualify for FHA loans during Chapter 13 after one year of filing and timely payments.

The Federal Housing Administration (FHA) has specific guidelines regarding Chapter 13 bankruptcy and its impact on FHA loans. Please note that guidelines and regulations may change over time, so it’s essential to consult with a qualified FHA lender or loan officer for the most up-to-date information. Here are the general guidelines as of my last update:

Waiting Period FHA Chapter 13 Bankruptcy Guidelines

For Chapter 13 bankruptcy, you may be eligible for an FHA loan if you have made at least 12 months of satisfactory Chapter 13 plan payments and received written permission from the bankruptcy court to enter into a new mortgage. During the Chapter 13 bankruptcy repayment period, you must make all your timely payments and maintain a good payment history.

Lenders typically require a minimum credit score to qualify for an FHA loan, and this requirement may vary. To qualify for a 3.5% down payment FHA loan, borrowers need a 580 or higher.

However, some lenders may have higher credit score requirements. You must meet the FHA’s debt-to-income ratio requirements. Your monthly housing expenses should not exceed a certain percentage of your monthly income. FHA loans have maximum loan limits that vary by location. Your loan amount cannot exceed the FHA loan limit for the area where the property is located. Some lenders may require you to complete a housing counseling program before being eligible for an FHA loan after Chapter 13 bankruptcy.

Stable Employment and Income

Lenders will want to see that you have a stable source of income and employment. These are general guidelines, and individual lenders may have additional requirements or overlays. Also, remember that bankruptcy and foreclosure can have different waiting periods and requirements depending on the specific circumstances and changes in regulations. Always consult an FHA-approved lender or mortgage professional to discuss your unique situation and get the most accurate and current information. FHA loan guidelines can change, so staying informed about the latest requirements is essential.