FHA Loans After Bankruptcy

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An FHA loan is a loan insured against default by the Federal Housing Administration. FHA loans have traditionally allowed people from the lower income to purchase a home that they otherwise would not be able to afford.

FHA Loan

In an FHA loan, the FHA guarantees that a lender won’t have to write off a loan if the borrower defaults. If the borrower defaults, the FHA will pay the borrower. Because of this guarantee, lenders are willing to make large mortgage loans. FHA mortgages are issued by federally qualified lenders.

Getting a FHA loan

Since the FHA only insures the loan against default, you must contact a FHA lender. The down payment can be as low as 3.5%. To qualify for a FHA loan, you must have at least two years of steady employment preferable with the same employer. Your last two years income should be the same or increasing. Your credit score should be 620 or higher. However in some cases, no credit score is required. Finally, your new mortgage payments under the FHA loan should not exceed 30% of your gross income before taxes.

Bankruptcy

If you have filed for bankruptcy less than two years ago, you may not qualify for a FHA loan. Once you have been in the Chapter 13 for two years, you are eligible for it provided you have made the last 12 month payments on time. If you have been in a Chapter 7 bankruptcy, you will be required to wait for two years after your discharge before you can qualify for a FHA loan. During the two years from discharge, you must have re-established good credit (or chosen not to incur new credit obligations), and demonstrated an ability to manage financial affairs.

Getting Legal Help

Bankruptcy is not the end of the world. Just because you have been through bankruptcy, it does not mean that you cannot get a FHA loan. You may be eligible for a FHA loan. Consult with an experienced bankruptcy attorney. The attorney can guide you through the entire process of getting a FHA loan after bankruptcy.

 

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