Information About FHA Mortgage After Chapter 7

[Ann]

This question may have been answered but I cannot find a definite answer and would really appreciate some input. If I have been discharged from a chapter 7 and am able to sell my home and pay off my mortgage can I at that time (providing I meet income and employment requirements) get approved for an FHA mortgage on another home? I have read that if you included your mortgage in your bankruptcy filing and only did the pay and stay they considered that a foreclosure and you must wait the 3 years. This is so confusing. Can anyone here provide a correct answer to this?

[btbeme]

An FHA loan MAY be available to you under the following circumstances:

- Ch 7 Bankruptcy - a minimum of two years must have passed since the closing of the applicant's (or co-applicant's) Ch 7.

- Foreclosure, deed in lieu (and they usually apply this rule to short sales) - a minimum of three years since the change of title on the foreclosed or surrendered property. This may be waived if it can be shown that the foreclosure, deed in lieu, or short sale was due to extenuating circumstances beyond the applicant's control. See note below.

If you are otherwise current on your mortgage, sell the home, and pay off the mortgage in full (not a short sale) then the two years post-BK would apply.

Note: Short sales are most often handled as a foreclosure. FHA loans are not a government loan program per se; they are government backed and guaranteed. The issuing bank will follow the federal guidelines for the loan but also retains responsibility to ensuring the applicant qualifies. Therefore, the issuing bank will be the final decision maker on whether a foreclosure (short sale, deed in lieu) waiver is warranted. In most cases, the "I had to short sale because of my BK" excuse is not justified. However, the cause for the BK (job loss, sudden critical illness, etc) might indeed be the reason that the foreclosure was necessary, and would be considered by the bank for waiver.

In all cases, the last date of importance will be used as the clock. So, if your BK closed in 6/2011 and your foreclosure in 2/2012, the Feb 2012 date is when the 3 year clock starts...unless, of course, you can get a waiver for the foreclosure and get the bank to use the two year clock that starts June 2011.

[justbroke]

Exactly as btheme has written, is how I interpret the FHA rules. This would be no different -- less the bankruptcy -- than a person who owns a home and is purchasing a new home. Unless you could qualify for both homes (with the combined DTI), then the sale of the existing home would be necessary. As such, it could not be a short sale or you'd fall into the other provision.

Additionally, FHA does allow the rules to be bent where there was a true, documented hardship.

[wantout]

I filed Chapter 7, discharged and closed 4/10. Did the pay and stay, in June of 2012, I did a refi on the same house, FHA backed loan, all went well took about 3 weeks from start to finish also got a 3% fixed rate for 15 years. I owed 16 years left, and saved $200 a month and am saving a lot on interest as well. Good luck

[basketsbears]

I filed Chapter 7, discharged and closed 4/10. Did the pay and stay, in June of 2012, I did a refi on the same house, FHA backed loan, all went well took about 3 weeks from start to finish also got a 3% fixed rate for 15 years. I owed 16 years left, and saved $200 a month and am saving a lot on interest as well. Good luck

Oh - I would LOVE to be able to do something like that when the time passes. So, for a refi - would still need to wait for two years post-BK?

[tobee43]

wantout didn't mention if his/hers house was underwater. i know many in my area are trying to get refi's but since there homes will not appraise out they are not getting the badly needed help for refi's

also, some of the banks are beginning to drop or forgive some of the principle. if i were you, i would call your present lender and see if there are any programs available for you. never ever hurts to ask.

best of luck!

[Ann]

All good news! Thank you very much for your input!