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Chapter 13 Cash-Out Refinance Buyout on FHA Loans
I have been in Chapter 13 for over two years with no missed payments. I would like to seek a voluntary discharge and pay off my remaining debt. Would a voluntary discharge prevent me from securing an FHA home loan?
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1 Reply
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My ability to obtain a residual debt FHA loan may be restricted in some cases as I file for a voluntary discharge against a Chapter 13 bankruptcy. A few things should be ironed out first:
Chapter 13 Bankruptcy Explanation
Chapter 13 is Quite Simple. In short, this type of bankruptcy focuses on restructuring all debts and introducing debt repayment plans for up to 3 to 5 years.
Voluntary Discharge: When voluntary discharge is sought, and payments are made towards the remaining debt, these approaches can be seen positively as they portray the critical area of performing a positive intention of paying one’s obligations back.
FHA Loan Eligibility Requirements
FHA Guidelines: The Federal Housing Administration (FHA) defines how borrowers with a bankruptcy history can obtain loans.
Waiting Time: For FHA requirements, a 2-year waiting time is set after a Chapter 13 bankruptcy discharge to qualify for a loan. But if you have paid everything without fail and request voluntary discharge, you can qualify even earlier.
No Missed Payments: Your never-missing payments during your Chapter 13 plan prove that you were responsible enough; this will work in your favor.
Important Considerations
Credit Score: Ensure your credit score is Okums since FHA loans have minimum credit score requirements (mostly about 580 for a 3.5 percent Down Payment).
Debt-to-Income Ratio: Your DTI ratio has to conform to FHA standards (usually less than 43%).
Documentations: You will also have to produce documents showing that you are on Chapter 13 and records concerning your payments.
Speak to a Lender
Pre-Approval: Speak to an FHA lender approved for your pre-approval and a detailed discussion of your circumstance. They can offer advice taking into consideration your circumstances.
Early Eligibility Options: Several lenders, mostly those with high demand and low account balances, may offer early eligibility options under some situations.
You may take an FHA home loan after voluntarily Discharging Chapter 13 as you have consistently made payments. However, to make the right move, you must contact a professional lender who understands the requirements and can help you with the necessary steps. Let us know if you have any other questions or require more precise guidance.