Where do these numbers come from exactly? FHA and HUD regulations are readily available online.
If you have filed a Chapter 7 bankruptcy, HUD Guideline 4155.1 : 4.C.2.g provides: A Chapter 7 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy.
In some cases, in less than two years, but not less than 12 months, a borrower may be approved for an FHA insured mortgage, if the borrower:
1. can show that the bankruptcy was caused by extenuating circumstances beyond his/her control, and 2. has since exhibited a documented ability to manage his/her financial affairs in a responsible manner.
In that instance, the lender would want to document that the borrower’s current situation indicates that the events that led to the bankruptcy are not likely to recur.
A borrower can also obtain an FHA insured mortgage even during a Chapter 13 provided that:
1. one year of the Chapter 13 Plan under the bankruptcy has elapsed;
2. the borrower’s payment performance has been satisfactory and all required payments have been made on time; and 3. the borrower has received permission from the bankruptcy court to enter into a mortgage transaction.
The bankruptcy court would likely require the payments to be at or less than the current housing expense so as to not negatively impact the Chapter 13 plan payment or payouts to unsecured creditors during the remainder of the bankruptcy.
In many cases filing a bankruptcy will relieve a potential borrower of old credit card or hospital debt, potential deficiency balances on mortgages for surrendered homes and will actually serve to help a person qualfiy for an FHA insured loan.
While your credit score will drop approximately 150 points when filing a bankruptcy, many clients are surprised at how quickly their score recovers. Additionally, their DTI (debt to income) ratios improve dramatically as the debt is jettisoned.
If you would like to discuss bankruptcy options available to you, please contact us at Arkovich Law