FHA Bankruptcy Guidelines

FHA Bankruptcy Guidelines

FHA loans are usually given to customers with lower than average credit ratings. However, several things may disqualify applicants from getting FHA approval, for example regular overdue payments and no credit history. Fortunately, applicants with a background of bankruptcy continue to be eligible for FHA loans, although the guidelines are a little different from a regular case. In case you have a history of bankruptcy, be sure to consult with your FHA lender prior to filing for financing, since some lenders are more stringent than others.

Chapter 7 Bankruptcy Guidelines

Chapter 7 bankruptcy is also called liquidation. After filing and being approved, the debtor is discharged out of most debt, and assets like vehicles and homes are usually removed. There are limitations to those rules, however. From the state of California, for example, debtors that have private property such as boats, mobile homes or stock cooperatives may continue to keep these assets if their value doesn’t exceed $50,000, according to The Bankruptcy website. Debtors that have a previous record of chapter 7 bankruptcy continue to be eligible for FHA loans, as long as the release date of the liquidation is at least 2 years old. Potential homebuyers should have created good credit in the last 2 decades or refrained from credit altogether, and have to be steadily employed.

Chapter 13 Bankruptcy Guidelines

Chapter 13 bankruptcy is commonly filed by debtors with a continuous income. It allows debtors to repay creditors over an extended amount of time and basically restructures their payments. Chapter 13 debtors can reach an FHA loan if they’ve fulfilled at least 1 year of obligations on a regular basis and on time. The court that approved the debtor’s bankruptcy situation should also approve of the loan application. Good credit history, job stability and sufficient financial resources are also required.

Exceptions

FHA applicants with a background of Chapter 7 bankruptcy may have the ability to reach financing after just 1 year out of the release date. In the event the applicant can show that the bankruptcy was due to circumstances which were beyond his control, then the FHA may consider the application. By way of example, if the borrower had fallen ill and needed medical therapy which wasn’t covered by insurance, the FHA might consider this an extenuating circumstance, based on Lifestyle Mortgage online.

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