Mortgage Loan after Chapter 13

[Mixman98]

Hello, this is my first post on the forum. I've read numerous different takes on whether or not and the length of the wait time is for obtaining a mortgage loan after Chapter 13 bankruptcy is discharged. I've seen anywhere from 4 years to 0 wait thru FHA. I'm hoping someone can shed some light on what the real wait time frame is? Also, should I be applying for some credit cards and paying them off on time or ahead of time to increase my credit score? Thanks, Larry

[shipo]

There are two answers, zero time and two years...

There is a point within a Chapter 13 (don't remember the exact rules on this), and certainly immediately after the discharge, where you can apply for a "Manually Underwritten" mortgage.

Then there is the two-year rule which makes you wait two years following the discharge of a Chapter 13 before you can apply for an automatically underwritten FHA mortgage.

Regarding the four year thing you referenced, I don't believe I've ever heard of such a timeframe relative to Chapter 13 bankruptcies.

[Mixman98]

Thanks for your reply. I appreciate that. It's a more definitive answer for sure.

[flashoflight]

FHA manual underwrite - 12 ontime payments to trustee, no 30+ lates anywhere

Conventional I think is two years after discharge.

As far as credit, the common technique for mortgage is AZEO (all zero except one) which is discussed frequently on credit forums. You will need three revolvers. One of them needs to be a Visa/MC/Amex/Discover. On a single national bankcard, leave a balance less than 8.9% of its limit. $10 balance is more than enough. You need to reduce balances before statement date if you spend too much. You don't need to run up debt to qualify for a mortgage. You don't need big credit lines for a mortgage. Just follow the above rules. Pay cash like you did during the 13.

[justbroke]

The real issue is finding a lender that will manually underwrite an FHA loan. You would likely need to shop through a broker rather than a traditional bank, traditional lender, or a credit union.

Fun fact, Fannie Mae (FNMA) is also available after 2-years past discharge. It actually has a lower downpayment requirement for first time borrowers (3% rather than FHA's 3.5%), and higher loan limits. The Fannie Mae loan is known as a conforming (and sometimes a conventional) mortgage.

The nice thing about conforming/conventional mortgages through Fannie Mae is that they will accept the discharge date of a bankruptcy as the foreclosure date of any foreclosure that was included in the bankruptcy. This can be important for former debtors that also had a foreclosure as part of the bankruptcy. Normal foreclosure seasoning for FHA is 3-years from the date the deed changes hands! Normal foreclosure seasoning for conventional loans (Fannie Mae) is 7 years