Mortgage After Filing Chapter 13 Bankruptcy
One of the frequently asked questions is can I qualify for a mortgage after filing Chapter 13 Bankruptcy without being discharged? A Chapter 13 Bankruptcy is normally a five-year debt restructuring plan under the direction of the U.S. Bankruptcy Courts. This is a long period of time to wait to purchase a house during a hot housing market.
The simple answer is YES. You can qualify for a mortgage after filing Chapter 13 Bankruptcy without the Chapter 13 Bankruptcy being discharged. All FHA loans while on Chapter 13 Bankruptcy repayment plan is manual underwriting. FHA and VA loans are the only two mortgage programs that allow manual underwriting. In the following paragraphs, we will cover qualifying for an FHA and VA mortgage after filing Chapter 13 Bankruptcy.
How Long Is The Mortgage After Filing Chapter 13 Bankruptcy?
VA and FHA loans are the only two mortgage loan programs that allow you to be eligible for a mortgage after filing Chapter 13 Bankruptcy. The Chapter 13 Bankruptcy does not need to be discharged. Many homebuyers and even bankruptcy have a hard time understanding that homebuyers can qualify for a mortgage during the repayment plan of Chapter 13 without the Chapter 13 Bankruptcy being discharged.
Per FHA and VA guidelines, you can qualify for a mortgage after filing Chapter 13 Bankruptcy after making 12 monthly on-time payments to the Bankruptcy Trustee.
You are only eligible for an FHA and/or VA mortgage after filing Chapter 13 Bankruptcy after making 12 timely payments to the Bankruptcy Trustee. In the following paragraphs, we will cover qualifying for an FHA and VA mortgage after filing Chapter 13 Bankruptcy.
Qualify for a mortgage after chapter 13 bankruptcy
Can You Buy a Home After Filing Chapter 13 Bankruptcy?
Have You Filed A Chapter 13 Bankruptcy and need to qualify for a mortgage after filing a Chapter 13 Bankruptcy? You can still buy a home as long as you’re keeping up with your repayment plan and qualify for a mortgage. Whether or not you qualify for a mortgage depends on the lender. Some lenders are more lenient than others when it comes to credit history with a Chapter 13 bankruptcy. Once you find a lender who is willing to approve you, you can apply for a loan.
What Is The Eligibility Requirements For a Mortgage After Filing Chapter 13 Bankruptcy?
To qualify for a mortgage after filing a Chapter 13 Bankruptcy, you’ll also need to meet the minimum waiting period to get a loan, which is twelve months after filing for a government loan. A lender wants to see evidence of your financial health during that period. Have you stayed on top of your finances, budgeted accordingly, and made all your payments on time? If yes, you may qualify for an FHA loan.
How Long After Filing Chapter 13 Filing Bankruptcy Can I Buy a Home?
Twelve months must have passed since you filed a Chapter 13, you must have made your repayments on time, and you must have written permission from either the bankruptcy court or bankruptcy lawyer in order to take out a new mortgage loan. Some lenders will deny the loan rather than manually review it. The loan will have to be manually reviewed unless two years have passed since a Chapter 13 discharge.
How Long After Filing Bankruptcy Can I Get an FHA Loan?
FHA loan requirements are simpler than other mortgage programs. You must have a steady income, be purchasing the home to be your primary residence, and have a debt-to-income ratio that is below 50%. Some of the benefits of an FHA loan with Chapter 13 are most mortgage lenders are approved to do FHA loans which gives you the flexibility to find the best deal.
What Are FHA Loans?
There are two types of traditional mortgage loans:
- Government-backed mortgages (FHA, VA, USDA loans)
- Conforming loans (Fannie Mae and Freddie Mac conventional loans)
FHA loans are insured by the Federal Housing Administration, which only requires a 580 credit score and a 3.5% down payment. Again there is room for flexibility here, if you are able to put down more for a down payment, your credit score doesn’t have to be exactly 580. VA and USDA loans are also insured by the federal government and have similar requirements. Again, twelve months must have passed since you filed a Chapter 13, without missing payments.
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What Are The Agency Guidelines To Qualify For Mortgage After Filing Chapter 13 Bankruptcy
You also will need written approval from the bankruptcy court or bankruptcy trustee. You must meet the loan program guidelines in order to apply for the loan. Specifically, in order to qualify for a VA loan, you must be a veteran, service member, or widow of a veteran.
The Department of Veteran Affairs doesn’t have a minimum credit score for VA mortgage loans. For USDA loans, a FICO score of at least 640 is required and you must have a low-to-moderate income looking to buy a home in a qualified rural area. USDA loans are usually harder to find, but can be a great affordable option if you qualify.
Fannie Mae and Freddie Mac Guidelines on Mortgage After Filing Bankruptcy
You could also apply for a Conforming loan with a Chapter 13 Bankruptcy, although there are stricter requirements. Conforming loans are not backed by the government. The two agencies that insure these loans are Fannie Mae and FreddieMac. One of their requirements is you must be either dismissed or discharged from your Chapter 13 bankruptcy before you can qualify for a loan.
Mortgage After Chapter 13 Bankruptcy Discharge Versus Dismissal
There is also a two-year waiting period after your Chapter 13 discharge date (assuming you have completed the three or five-year repayment plan), or a four-year waiting period after your Chapter 13 dismissal date. If bankruptcy is dismissed, it is probably because payments were not being made, and still owe their creditors which is why there is a four-year waiting period before they can apply for a conventional loan.
Mortgage Guidelines After Multiple Bankruptcies
If someone has more than one bankruptcy, a waiting period of at least seven years is required before they can apply, in order to give them plenty of time to find their financial footing. If you believe there were extenuating circumstances that caused you to file an In chapter 13 bankruptcy, the waiting period could be reduced from four years to two years for a conventional loan.
What Is Considered Extenuating Circumstance on Mortgages
According to Freddie Mac, there are three questions to determine whether there are extenuating circumstances.
- Were the events beyond your control?
- Has the problem been resolved?
- Is the problem likely to happen again?
However if an FHA and conventional loan don’t seem right, there are alternative loan options available. If you want to wait less time before applying for a loan, or want to borrow a larger amount of money and are able to pay higher interest rates and fees, then consider an alternative mortgage program.
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Non-QM Mortgage After Bankruptcy With No Waiting Period Requirements
Alternative mortgage programs, called Non-QMs, or Non-Qualified Mortgages, aren’t backed by the government. Gustan Cho Associates. offers non-QM loans one day out of bankruptcy and foreclosure with no waiting period. Requires a 30% down payment.
Mortgage lenders take on more risk and costs when they insure these programs.
To ensure you have the best chance at qualifying for a loan, make sure you have budgeted accordingly, and are able to meet lending guidelines such as credit score, income, and down payment. Be prepared to provide evidence of your Chapter 13 Bankruptcy as well.
Frequently Asked Questions (FAQs)
- What is a Mortgage After Filing Chapter 13 Bankruptcy?
After filing for Chapter 13 bankruptcy, a mortgage refers to obtaining a home loan after undergoing a reorganization plan supervised by a bankruptcy court. - How soon can I apply for a mortgage after filing Chapter 13 bankruptcy?
Generally, you can apply for a mortgage after filing Chapter 13 bankruptcy. Still, the timing varies depending on your lender’s requirements and financial situation. - Will filing Chapter 13 bankruptcy affect my ability to get a mortgage?
Filing Chapter 13 bankruptcy may impact your ability to get a mortgage. However, obtaining one with proper financial planning and credit rebuilding is still possible. - What steps can I take to improve my chances of getting a mortgage after filing Chapter 13 bankruptcy?
Enhancing your prospects involves revitalizing your credit, sustaining steady employment, setting aside funds for a down payment, and demonstrating responsible financial behavior. - Are there specific lenders who specialize in mortgages after filing Chapter 13 bankruptcy?
Yes, some lenders specialize in offering mortgages to people who have undergone Chapter 13 bankruptcy proceedings. Still, it’s essential to research and compare options. - How will my Chapter 13 bankruptcy discharge impact my mortgage application?
Your Chapter 13 bankruptcy discharge may affect your mortgage application timeline and requirements, so it’s crucial to understand its implications and discuss them with your lender. - What documentation must I provide when applying for a mortgage after Chapter 13 bankruptcy?
Documentation typically includes proof of income, bankruptcy discharge papers, credit reports, and other financial records requested by the lender. - What aspects do lenders take into account when assessing a mortgage application after Chapter 13 bankruptcy?
Lenders consider factors such as credit history post-bankruptcy, debt-to-income ratio, employment stability, and the overall financial health of the applicant. - Are government programs or assistance available for individuals seeking a mortgage after Chapter 13 bankruptcy?
Some government-backed programs, such as FHA or VA loans, may offer assistance or more lenient requirements for individuals seeking a mortgage after Chapter 13 bankruptcy. - Should I work with a mortgage broker or financial advisor when seeking a mortgage after Chapter 13 bankruptcy?
Collaborating with a mortgage broker or financial consultant experienced in post-bankruptcy lending can provide valuable guidance and help navigate the complexities of the process.
To learn more about qualifying for a mortgage after filing bankruptcy, contact Alex Carlucci at alex@gustancho.com or call Alex Carlucci at 262-716-8151. Text Alex Carlucci for a faster response.
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