FHA Loans After Bankruptcy

by: Staff Writer

There are times when bankruptcy really makes sense, the bankruptcy option has helped many people get  themselves a new start. FHA loans, which are constantly working toward helping people get into home loans, have the most relaxed guidelines when it comes to bankruptcy. Late in 2013 there is a lot of information that bad credit mortgage lenders are coming back to the market place due to FHA backing, so dig in here if you have filed for bankruptcy in the past, or are contemplating it, as it does have an effect on your ability to get a home loan. It may get easier, but this is current.

There are two options when it comes to personal bankruptcy. Chapter 7 and Chapter 13. Each comes with its own set of rules and requirements that effect the borrower and their ability to attain a home loan. Two major things are consistent for each type of bankruptcy, as far as almost all banks are concerned. New lines of credit must be established after the discharge of the bankruptcy, banks are going to want to see that the borrower is back on their feet, and can manage debt again. Credit scores are frequently damaged in the process, and credit scores are largely based upon the ability to manage debt , so it is important to re-establish the lines of credit and credit scores.

The other consideration is a waiting period as it relates to new home ownership. All banks are going to have a hands off approach for a period of time after the discharge of the bankruptcy. This can be confusing as it is important to know the terms and events in bankruptcy. Filing is the first step in bankruptcy, and discharge is the last. It is important that the borrower only start their time out or wait period from the end of the process or discharge. The two bankruptcy types look at this differently, the wait periods are below.

Chapter 13 Bankruptcy  – a new application may be submitted for an FHA insured loan ONE (1) year after Chapter 13 Bankruptcy has been discharged.

Chapter 7 Bankruptcy – a new application may be submitted for an FHA insured loan TWO (2) years after Chapter 7 Bankruptcy has been discharged.

It is important to know options that are available, life moves fast and borrowers do not want to find themselves in a bad position due to making the wrong decision. If a borrower has been discharged, the borrower should find out what is needed to jump back into home ownership.

Contact us for more information.