Yeah, most people didn’t know that either.
FHA loans & Bankruptcy
Chapter 13 bankruptcy is different from Chapter 7 in that it is a reorganization, rather than the “clean slate” approach.
In fact, you might think of it as a consolidation of your debts. Rather than seeking complete absolution from debt obligations, the debtor seeks to propose and execute a repayment plan.
FHA home loan underwriting guidelines allow for a borrower to qualify for an FHA-insured loan after a Chapter 13 bankruptcy discharge. The basic requirements are as follows:
- The borrower has been in a repayment plan for 12 months
- All payments have been on time for 12 months
- The borrower has received written authorization from the bankruptcy court allowing them to take on the new mortgage obligation
But why would you do that?
Aside from the whole “dream of homeownership” thing, why would you take on such a huge financial responsibility so soon AFTER being granted relief via discharge in bankruptcy?
Any installment debt helps your credit score & history when you pay it on time. Mortgages are the ultimate installment loan.
Now, it may not make sense for you to get a home loan after coming out of a bankruptcy. To be sure, you need to exercise rigorous financial prudence in the interest of rebuilding your credit.
I was hesitant to write this post at first. Given the recent “mortgage meltdown”, or whatever we’re calling it these days, it isn’t always advisable to do things just because you can.
However, I believe that the more concrete information consumers have, the better chance we have for recovery.
And if you need to consult with someone about your options regarding home loans in Oregon and Washington, I am happy to help. Call me at 503.799.4112, email jason@mypmb.us, or fill out the following form. No spam, guaranteed.
