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Down Payment Manual Underwriting FHA Loans
Do you know of any wholesale mortgage lenders that offer down payment assistance on FHA loans via manual underwriting? What are the eligibility requirements for the manual underwriting down payment assistance FHA loan program? Is it forgivable or non-forgivable? Is the DPA treated as a second mortgage and if so at what interest rate? I have many borrowers who want to purchase a house during Chapter 13 Bankruptcy repayment plan, and they will all be manual underwriting FHA loans.
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Down Payment Assistance for Manually Underwritten FHA Loans During Chapter 13 Bankruptcy
While some down payment assistance (DPA) programs in the wholesale and correspondent channels do allow manually underwritten FHA loans, discovering one is just the beginning. For borrowers actively repaying a Chapter 13 bankruptcy, both the DPA provider and the lender must be willing to work with the ongoing bankruptcy process.
Land Home Financial Services could be considered as well, but since their policies exclude borrowers with an active Chapter 13 bankruptcy, their program is off the table for those cases.
This difference matters. Even if a DPA program allows manual underwriting for FHA loans, it might still insist that the bankruptcy be fully discharged before any funds are released. As a result, such a program would not help borrowers hoping to buy a home while still in an active Chapter 13 bankruptcy. After reviewing the August 19, 2026, guidelines, my top picks would be Chenoa Fund, Orion Lending, and Plaza Home Mortgage.
FHA Loans During Active Chapter 13 Bankruptcy
HUD does not disqualify a borrower for being in an active Chapter 13 bankruptcy. FHA loans can be made to satisfy the required obligations under a Chapter 13 bankruptcy before discharge. Generally, at least 12 months of the Chapter 13 payout period must have elapsed.
The borrower must have made satisfactory payments under the repayment plan and have written permission from the bankruptcy court to enter into the mortgage transaction.
HUD states that meeting these requirements disqualifies Chapter 13 Bankruptcy from being a barrier to FHA financing.
In these situations, FHA loans usually require manual underwriting. The underwriter digs into the borrower’s Chapter 13 payment record, housing history, income stability, debts, reserves, payment shock, and more. Since DPA providers often set stricter rules than HUD, layering DPA onto the loan can make the review process even more complex.
Plaza Home Mortgage FHA 100% CLTV Combo
Plaza Home Mortgage stands out with a wholesale program tailored for these borrowers. Their FHA 100% CLTV Combo combines an FHA first mortgage of up to 96.5% LTV with a second mortgage covering up to 3.5% for the down payment and closing costs. The August 18, 2026, version of the Plaza program includes FHA manual underwriting with a minimum credit score of 600.
Plaza Home Mortgage allows borrowers to have prior home ownership experience and does not set a maximum borrower income limit.
The program is available outside New York and Washington, except where licensing or other constraints limit its availability.
The Plaza DPA is a true second mortgage with NHF and is not forgivable. It is fully amortized over 10 years and requires monthly payments.
Interest Rate on the Down Payment Assistance
The interest rate on the second mortgage is usually 2 percentage points higher than the FHA first mortgage, with some exceptions. Borrowers can use the DPA funds for their down payment and closing costs. For instance, if the FHA first mortgage has a 6.50% interest rate, the Plaza/NHF second mortgage would generally be set at 8.50%, though this depends on state rules and final pricing. Because this second mortgage is amortizing, it can affect the borrower’s qualifying ratios.
In a Chapter 13 case with manual underwriting, a borrower who qualifies for the FHA first mortgage might find their ratios pushed over the limit once the DPA second mortgage payment is factored in.
According to Plaza’s bankruptcy section, all borrowers must comply with FHA Handbook 4000.1 if they have a Chapter 7 or Chapter 13 bankruptcy. The published guideline does not indicate that Chapter 13 financing can be processed before Chapter 13 is dismissed. As a result, Plaza is an appropriate target for an active Chapter 13 situation.
Manual Underwriting on a 100% CLTV Home Purchase Loan
Before submitting most loans to Plaza, there is an important detail to check. The latest FHA 100% CLTV program guidelines and product snapshot confirm that manual underwriting is allowed. Yet, Plaza’s general wholesale product webpage still shows outdated information, requiring AUS approval and stating that manual underwriting is not permitted. Because the program guideline is more up-to-date and specific, I would rely on it for initial screening. However, I strongly suggest reaching out to the Plaza account executive or the scenario desk for written confirmation before pre-approving an active Chapter 13 borrower under this DPA.
For borrowers who meet higher credit standards, Orion Lending’s Elevate Grant DPA might offer a simpler path. The key benefit is that Elevate is a grant program, not an amortizing DPA second mortgage.
Right now, Orion provides FHA grant assistance of 2.00% or 3.50% of the lower of the purchase price or appraised value. This grant can help cover both the down payment and closing costs. The program includes an early payoff provision: if the borrower pays off the first mortgage in less than six months, the grant will be added to the payoff amount. After six months, the program operates differently from a typical amortizing DPA second mortgage, which is usually a 10- or 15-year loan.
DPA FHA Manual Underwriting Borrowers
For Chapter 13 borrowers, this option shines because it does not add another monthly payment for the DPA, making it easier to keep the debt-to-income ratio in check. Orion authorizes FHA Refer/Eligible loans to be manually underwritten using FHA Handbook 4000.1. The minimum credit score is 640. For FHA manual underwriting, borrowers with credit scores between 640 and 679 are limited to a 31% housing ratio and a 43% total debt-to-income ratio, and must have 3 months of PITIA reserves.
Orion Wholesale Mortgage
If the score is 680 or higher, Orion follows the FHA Handbook 4000.1 for manual underwriting. Orion also requires a payment shock review for some manually underwritten files. At least one borrower who occupies the FHA-insured property must complete homeownership counseling.
The regular FHA version has a 160% area median income limit, but Orion exempts some borrowers, including qualifying first-time homebuyers and certain employees.
The program is not offered in Washington, Guam, Puerto Rico, or the U.S. Virgin Islands, according to the current matrix.
The Orion Elevate guidelines I reviewed do not specifically prohibit Chapter 13 bankruptcy. For situations not covered by Orion, they refer back to the FHA Handbook 4000.1 for manual underwriting.
Borrowers in an Active Chapter 13 Bankruptcy Repayment Plan
For all these reasons, Orion stands out as one of the top choices for borrowers in an active Chapter 13 bankruptcy with a credit score of 640 or above. Still, I would reach out to Orion to confirm and secure written approval that the borrower has completed at least 12 months of plan payments and has court authorization before giving a firm preapproval.
The Chenoa Fund
The Chenoa Fund is another strong contender. Unlike many traditional wholesale lenders, CBC Mortgage Agency works hand-in-hand with approved lenders to deliver its programs. The current Chenoa Fund Seller Guide is Version 12.32, dated August 6, 2026. Chenoa now allows FHA manual underwriting. Some mortgage professionals may still believe that manual underwriting is not permitted because of older versions of the guide.
To qualify for manual underwriting, a Chenoa FHA borrower must have a minimum credit score of 600. Chenoa sets manual underwriting ratio limits at 37% for housing and 47% for total DTI.
All manually underwritten borrowers must complete an education requirement, regardless of credit score. The tenth version of the Chenoa Fund Seller Guide also requires documentation of satisfactory housing history for the last 12 months or for the period during which the borrower has lived rent-free.
Manual Underwriting on Chenoa Fund
Chenoa’s manual underwriting overlay comes with a 0.25 pricing adjustment. Borrowers with scores between 600 and 639 need to complete specific homebuyer education courses, while those scoring 640 or above can opt for an approved HUD homebuyer education course. Chenoa provides both repayable and forgivable second mortgage options.
The Chenoa Second Mortgage runs for 10 years and carries an interest rate 1% above the FHA First Mortgage. Since it is amortizing, borrowers must make an additional monthly payment.
Chenoa also features a 0% interest, subordinate mortgage with no monthly payment. This 30-year option can be forgiven after 36 on-time payments on the FHA First Mortgage and meeting Chenoa’s lien-release rules. Any late payment during the forgiveness period restarts the clock.
Forgivable Down Payment Assistance Mortgage Programs
The forgivable DPA is still a mortgage and remains a second lien on the property. It is not an unconditional cash payment.
Chenoa currently advertises FHA assistance of 3.5% or 5%, with a minimum credit score of 600, no first-time homebuyer requirement, and no general income cap for borrowers. The program is available nationwide except in New York, subject to program and lender-partner restrictions.
The August 2026 Chenoa guide does not have a provision requiring a Chapter 13 Bankruptcy to be discharged. Chenoa states that FHA loans must meet FHA Handbook 4000.1 unless a Chenoa overlay applies. For this reason, I would send Chenoa scenarios to the scenario desk for borrowers currently in a Chapter 13 repayment plan.
Land Home Financial Services Within Reach FHA DPA
Land Home Financial Services offers Within Reach as part of its FHA DPA options in the wholesale channel. Within Reach permits FHA manual underwriting and offers 3.5% assistance via a fully amortizing second mortgage. This second mortgage stretches over 15 years and typically carries an interest rate about two points higher than the FHA first mortgage.
Borrowers are required to make payments on this second mortgage. Even though Within Reach allows FHA manual underwriting, I would not recommend it for buyers who are still making payments under a Chapter 13 plan.
It is crucial to note that this program does not support borrowers with an active Chapter 13 bankruptcy. To be clear, this program does not solve the challenge for borrowers with an active Chapter 13 bankruptcy. Discharge is the bare minimum for financing. This shows that simply asking if a lender allows FHA manual underwriting does not give the full picture. A lender might permit manual underwriting, but additional rules, such as a bankruptcy overlay, could still block the borrower.
The Importance of the Chapter 13 Bankruptcy Overlays
For Chapter 13 borrowers, the bankruptcy overlay can be just as critical as the credit score itself. A second mortgage that requires payments can hurt a borrower’s debt-to-income ratio, which makes grant programs like Orion Elevate especially appealing.
A forgivable second mortgage, such as Chenoa, is attractive because it charges 0% interest and requires no monthly payments.
The lien remains on the property until the forgiveness requirements are met and the lien is released, but no interest accrues during that period. Options like Plaza/NHF or the repayable Chenoa add a second mortgage, which means another payment. For some borrowers, this extra payment can make it harder to qualify for the FHA manual.
Issues with High Debt-to-Income Ratio Due to DPA Second Mortgage on Manual Underwriting
For example, if a borrower is already close to the FHA manual underwriting limit, an extra $100 to $150 payment could push their debt-to-income ratio over the threshold, even if they initially qualify for an FHA mortgage. For this reason, I would calculate the expected second-mortgage payment during preapproval rather than waiting until the DPA loan is submitted. Chapter 13 court approval becomes even more crucial when a DPA second mortgage is involved. When DPA is layered as a second loan, getting bankruptcy court approval becomes essential.
The borrower is not only seeking approval for a single FHA mortgage. Programs like Plaza/NHF or Chenoa provide both an FHA first mortgage and a second mortgage secured by the new home.
When working with the bankruptcy attorney, I would share the purchase price, first mortgage amount and payment, DPA second mortgage interest rate, plus any taxes, insurance, association fees, and the total proposed amount. Once the bankruptcy attorney reviews the details from the mortgage originator, they can decide what must be submitted to the trustee and the bankruptcy court. Since procedures differ by jurisdiction, the attorney must determine which motion, trustee approval, or court order is needed. This is a legal issue handled by the borrower’s bankruptcy attorney, not the mortgage originator.
Which Program I Would Investigate First
If a borrower’s credit score is 640 or above, Orion Elevate would be my first choice. Its grant structure is especially helpful in Chapter 13 cases because it avoids DPA amortization. The main downside is Orion’s stricter manual underwriting, including a 31/43 ratio cap for scores between 640 and 679 and a three-month reserve requirement. Chenoa is also worth considering.
The August 2026 guidelines allow manual underwriting for scores of 600 or higher, with a maximum 37/47 ratio. The 0% forgivable second loan with no monthly payment is a major plus for Chapter 13 borrowers.
Plaza’s program is another option I would consider for these borrowers. The August 17, 2026, documents show that manual underwriting is allowed with a minimum score of 600. Plaza’s website directs Chapter 13 borrowers to the FHA Handbook 4000.1 for discharge requirements instead of setting its own. To be safe, I would wait for written approval from a scenario analysis before using Plaza for Chapter 13 cases. Currently, I would not recommend Land Home Within Reach for borrowers with open Chapter 13 cases, since Land Home insists on full bankruptcy discharge.
The Question I Would Send To Each Wholesale Account Executive
If I simply ask an account executive, “Do you allow FHA manual underwriting?” I will miss out on crucial details. The real question is whether the lender will consider an FHA purchase with down payment assistance for a borrower who is still in an active Chapter 13 payment plan, has made 12 months of on-time payments, has court approval, and requires manual underwriting.
For FHA borrowers in a Chapter 13 plan, as you described, the best starting points are Orion Elevate, Chenoa Fund, and Plaza’s FHA 100% CLTV Combo. For all three, it is essential to get confirmation from the Scenario Desk before issuing preapproval.
The account executive should review the minimum credit score, maximum manual DTI, reserve requirements, housing payment history, payment shock, homebuyer education, DPA percentage, whether the assistance is a grant or second mortgage, if the second mortgage is forgivable, the interest rate and term, whether there is a monthly payment, and if lender or DPA overlays require Chapter 13 discharge. The account executive should provide all relevant information in writing before the borrower signs a contract.
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