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FHA Loan During Chapter 13 Repayment
I currently own a home and would like to move in the next 18 months. I am in Chapter 13 and am currently paying into a plan. I have never been late nor have I ever been late on my mortgage. How does this work with Chapter 13? Could I sell and buy another home? What roadblocks, if any, am I looking at?
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Relocating during Chapter 13 bankruptcy has its procedural difficulties. However, selling your current property and acquiring a new one is possible. Let’s examine some important aspects of this interrelated transaction:
General Idea about Chapter 13 Bankruptcy
3 to 5-Year Plan: Within Chapter 13, you need to propose a repayment plan that lasts 3 to 5 years. You must follow this plan and make the payments as stipulated.
Subject to Court Approval: Any notable financial transaction, including selling or buying a home, may be subject to court approval. This is because you must comply with the conditions set in the repayment process.
Selling Your Current Home
Reimbursement Purposes: If you own assets, your plan will require you to pay back lenders’ fees on the selling portion of your house. It would help if you spoke to your bankruptcy lawyer to understand how any equity is dealt with.
Court Approvals: That usually means competing with insurers and insurance companies to acquire and employ them precisely to sue your financing plan.
Getting a New Property
Qualifications: If you are in Chapter 13 bankruptcy, you can purchase a home after selling it. However, the following criteria need to be fulfilled:
Trustworthiness: Ensure your credit score and other factors can help you pass mortgage requirements. This is because you will pay your mortgage consistently during and after the Chapter 13 payment.
DTI Ratio: Your DTI ratio, including your Chapter 13 payment, will be one of the many factors lenders consider before lending. They will also consider your capacity to repay the new mortgage.
FHA Home Loans: If you are considering this loan, you can qualify after 1 year of making timely payments again through your Chapter 13 plan. However, the new loan must be approved by the court.
Obstacles You Need to Keep in Mind
Court Approval: To buy or sell a house, you might have to get the court’s court’s orders, which could delay and complicate the process.
Equity: If you have a large amount of equity, you will have to utilize some of the proceeds to settle your obligations to creditors, making it difficult to pay a binder of a new home.
Loan Approval: These borrowers may have some specific obligations for lenders in Chapter 13, and it may be slightly harder for them to get a loan than for someone who does not have a history of bankruptcy in Chapter 13.
Seek Advice from Relevant Professionals
Bankruptcy Attorney: You must always tell your bankruptcy lawyer about your intentions. They can suggest how to sell your home and deal with the situation’s legal aspects.
Real Estate Agent: A knowledgeable agent will walk you through the process of selling and buying so that you will have a good grasp of the market and your preferences.
Selling one’s house and buying another while in a Chapter 13 bankruptcy plan is possible. However, this can only be done with a comprehensive strategy, as numerous legal prerequisites exist. The steps should be followed diligently, and with your lawyer’s assistance and a clear insight into your economic position, it can be achieved successfully.