Borrowers are required to wait a set amount of time to be considered eligible for an FHA loan depending on the type of bankruptcy they filed. A Chapter 7 bankruptcy requires a two year wait period, while a Chapter 13 bankruptcy requires a 12-month wait period from the date the repayment plan is discharged.
The article goes on to explain that in addition to the waiting period, borrowers are also required to demonstrate a good credit record since the bankruptcy. This includes two years of satisfactory credit history, as well as proof of timely rent or mortgage payments. The article emphasizes the importance of these requirements, noting that if these conditions are not met, a borrower will not be eligible for an FHA loan even after the waiting period has expired.
The article then touches on other important considerations with regards to FHA loans and bankruptcy. For example, it notes that a borrower’s credit score will automatically drop after filing for bankruptcy, which can make it harder to qualify for an FHA loan. It also points out that lenders may use additional criteria to determine a borrower’s eligibility, such as their income level or employment status.
The article wraps up by addressing a reader’s question on whether they should wait to apply for an FHA loan until their bankruptcy has been completely discharged. It advises readers not to do so, since lenders will not process an application until after the waiting period has passed.
In summary, this article provides information on the waiting periods for borrowers who have gone through a bankruptcy to be eligible for an FHA loan. It explains the two and 12-month waiting periods for Chapter 7 and Chapter 13 bankruptcies, respectively, and outlines the necessary requirements for a borrower to be considered a good credit risk. It also covers other important considerations with regards to FHA loans and bankruptcy, such as the potential effect on a borrower’s credit score, additional criteria used by lenders to determine eligibility, and the fact that lenders will not process an application before the waiting period has passed. By providing this information, the article helps potential borrowers to understand the process for obtaining an FHA loan after bankruptcy.
This article was contributed on Nov 12, 2023
