In this tough economy borrowers worry about bankruptcy, foreclosure, and the effects such issues can have on the ability to borrow. Many wonder these days after filing for Bankruptcy about purchasing home and what loans can they get approved for and the required waiting period, FHA has a home loan available after filing bankruptcy or a foreclosure.
After Chapter 7 bankruptcy, (not to be confused with Chapter 13 bankruptcy rules) the borrower must wait out the FHA’s minimum “seasoning” period. That period is two years plus any additional amount required depending on the lender. Some banks will require that a borrower wait a total of three years before applying for a new home loan.
Other lenders may be willing to work with qualified borrowers after the FHA two-year minimum for Chapter 7, but it is important to know that the required waiting period begins from the time the bankruptcy is discharged--NOT the time the bankruptcy is filed.
Here is some additional information on waiting periods and other requirements for both Chapter 13 and Chapter 7 bankruptcy:
CHAPTER 13 BANKRUPTCY WAITING PERIODS
FHA rules allow a lender to consider approving an FHA loan application from a borrower who is still paying on a Chapter 13 Bankruptcy–but only if those payments have been made and verified for a period of at least one year.
The borrower isn’t automatically able to apply for a new FHA loan if they meet this requirement--the court trustee’s written approval is a condition of the policy. Additionally, the borrower must write a detailed explanation of the bankruptcy and submit it with the loan application. The borrower must have good credit, a satisfactory employment history and other financial qualifications.
CHAPTER 7 BANKRUPTCY WAITING PERIODS
As mentioned above, all borrowers must wait least two years after the discharge date of a Chapter 7 Bankruptcy. The discharge date should not be confused with the date bankruptcy was filed.
As with Chapter 13 bankruptcy, FHA regulations demand a full explanation to be submitted with the FHA home loan application. To get a new FHA insured mortgage loan after Chapter 7, the borrower must qualify financially, establish a history of good credit in the wake of the filing of the Chapter 7, and meet other FHA requirements.
Whatever you want to call it, being upside down on your mortgage is a very unpleasant point of view.
For many homeowners in the midst of this upside down valuation of a home, speaking to a qualified mortgage professional is a good option. An experienced loan consultant can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.
Foreclosure is not inevitable when you fall behind on your mortgage payments. There are options, but, you need to discuss these options with a lender If you are unable to qualify for a mortgage refinance, you may be able to refinance through the Home Affordable Refinance Program (HARP), part of the federal Making Home Affordable Program.
HARP may make sense if you:
• Have a loan that is owned by Freddie Mac or Fannie Mae.
• Have little or no equity in the home.
• Have the financial ability to afford the new payments.
You may be eligible for HARP through your existing lender or a different participating lender if you:
• Own a 1- to 4-unit home as your primary residence, a 1-unit second home, or a 1- to 4-unit investment property.
• Are timely making your mortgage payments.
• Choose a fixed-rate mortgage or an adjustable-rate mortgage for your new mortgage. If you choose a fixed-rate mortgage, you can finance more than 105 percent of your home's value, but if you choose an adjustable-rate mortgage, you cannot finance more than 105 percent.
• Choose a mortgage solution that can improve the long-term affordability or stability of your mortgage with the refinance.
Another feature of HARP is that applicants can forgo a home appraisal if a reliable automated valuation model is available in the area. This can save the borrower time and money
If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor.
While it does take time, there is definitely life (and credit) after bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.
Tips for Rebuilding Credit after bankruptcy:
• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.
First Colorado lending presents clear, professional loan proposals that are easy to understand that meets the specific requirements of every homeowner.
First Colorado Lending
14143 Denver West Parkway Suite #100
Golden, CO 80401
Toll Free- 800-451-1950
NMLS # 1023030 - Licensing: Colorado: Regulated by the Department of Real Estate