Chapter 13 and FHA Loan Suggestions

Posted on May 25 By MLP Lending Guide

Chapter 13 and FHA Loan Suggestions

Bankruptcy can be a troubling time for anyone. You arent given much room to decide how much to pay the trustee and many are just struggling to get by. A home loan seems almost out of the question. How can you get a loan when youve recovering from a Chapter 13 Bankruptcy? One option that many people do not know about is a FHA Loan. Potential borrowers are not automatically turned away from a FHA loan just because of a bankruptcy.

Some important facts to remember about bankruptcy and FHA loans:

  1. Pay all of your bills on time. It is important to be able to show that you are repairing your credit. DO NOT BE LATE. By consistently making your payments on time, especially on your home or payments to the trustee, you can turn your credit around as well as possibly open up opportunities to buy out of your bankruptcy, which will save you money.

  1. Write down why you had to file for Chapter 13. What happened? Did you lose your job, go into the hospital or was it some other sort of emergency? Write it down and be specific, give details. Show how you have turned things around for yourself. As discussed later, youll need to receive permission to enter into a new mortgage transaction and having this information will be helpful for you and your lawyers.

  1. Keep everything. Anything from lawyers, the courts, or the trustees should be carefully stored and filed, if possible. Almost all of the information you receive will be needed at some point down the road, typically when trying to repair your credit report. SAVE EVERYTHING.

  1. After making your payments, on time, for a year you should be able to buyout your bankruptcy. The HUD website can provide more details, but if the lender documents that one year has elapsed and the payment performance has been satisfactory (read: paid in full and on time) then a borrower should be able to obtain a FHA loan. As I mentioned earlier, the borrower will have to receive permission from the court in order to go into a new mortgage transaction, but if you did number 2, you should be fine.

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