-
Qualifying For FHA Loan After Chapter 13 Bankruptcy Discharge
Qualifying For FHA Loan After Chapter 13 Bankruptcy Discharge
-
1 Reply
-
Getting an FHA loan is less rigorous than its conventional counterpart for borrowers who have had their Chapter 13 bankruptcy discharged. If you were aiming for an FHA loan and are still determining the requirements, read on. The entire process can be summarized in the following steps:
Wait a little longer.
Waiting Period: Most applicants of an FHA loan will be required to wait a minimum of 12 months after filing a Chapter 13 bankruptcy before they qualify.
Credit Factors: Factors under credit, such as having timely payments on a repayment plan, should be maintained a year before the loan’s approval.
Show you are responsible when it comes to finances.
Payment History: It is crucial and critical to have a clean track record of paying debts on time (including any debts paid off through bankruptcy filing).
Consistent Employment: You will need to show proof that you have earned a stable income for two or more years, issued by the same employer or through self-employment.
Compensate and balance credit.
Rebuilding Credit: To improve your credit score, make timely debt payments, avoid negative credit issues, and reduce credit card debt.
Progress Reports: Examine your credit score regularly and ensure no mistakes are included and progress is made.
Gather all documents needed.
What to take with you: Provide planning documents such as your discharge papers and the repayment plan.
Income Verification—Pay stubs, income tax returns, and other records or bank statements will likely be requested to certify your income.
Loan to Value ratio (LTV) and the Debt to Income ratio (DTI)
LTV Requirements – FHA loans can have a loan-to-value ratio of up to 96.5%, which means a minimum payment of 3.5% has to be made
DTI Ratios—However, the FHA guidelines also allow for a DTI-to-ratio as high as 43% with some exceptions, which usually consider strong compensating factors.
Look for FHA Approved Lenders
Lender Finding—Locate lenders who understand the requirements and have experience with FHA loans, especially those for post-bankruptcy financing.
Pre-Approved – To reduce the time of application or understand the amount of money you can borrow, consider being pre-approved.
Provide An Explanation For Some Late Payments
Explanations—Late payments received during the bankruptcy repayment plan must be explained. Prepare for questions from the lender. Such an explanation provides assurance.
Speak to Eligible Mortgage Professionals Advisors—A mortgage broker or lender familiar with the FHA guidelines can make strategic points to smooth the application.
It is possible to get an FHA loan after a discharge of a Chapter 13 bankruptcy, particularly as long as there is a focus on re-establishing stability in payments, income, and credit. You understand the necessity of preparing certain documentation. You increase the chances of being approved. Consultations with qualified lenders can also assist further.