There is help out there!
In todays volatile lending market there is an old standby that is moving forward to a new place in American finance…. The FHA loan.
The History of the FHA The Federal Housing Authority was set up after the depression of the early 1930’s to help Americans recover from the tremendous numbers of foreclosures during the depression and get Americans back into home ownership. Prior to the FHA there were not 30 year loans generally available, people were financing homes with 5 to 10 year loans. FHA may be doing the same thing now as traditional lending goes through it’s changes. Initially and for most of the history of the organization it was completely self funded and did not rely on any taxes for it’s operating capital. It was funded initially by mortgage insurance premiums and appraisal fees. It took till this year for the FHA to come to the Government to help make up a budget shortfall. The predictions are that the FHA will recover as it is the only option for credit challenged borrowers, and is writing a record number of loans.
Today’s FHA We have seen conventional loans tacking on rate increases for borrowers with lower credit scores. A couple of years ago anything above 600 was considered decent while now some lenders are adding 1/2 a point to the interest rate on 30 year fixed rate loans for borrowers with credit scores between 650 and 680 and 1.25% added to interest rates for borrowers with credit scores between 620 and 650. Below 620 is considered “subprime” and the rates rise dramatically. Yet FHA will still make loans to borrowers with credit scores as low as 580. These are 3% down loans with interest rates fluctuating between 6 and 6.25% 30 years fixed. FHA has recently started charging a premium based on credit scores as well. The loan amount has increased to $346,250 recently in most of metro Atlanta. It may now be a better deal for not only credit challenged buyers, but for the mid-range credit purchaser with 650-680 credit scores.
There is a one time mortgage insurance premium of 1.5% of the loan amount which can either be paid in full at closing or added to the loan amount and financed, then there is a monthly mortgage premium which is .5% of the loan amount per year, (1/12 of that paid each month). Conventional loans also have mortgage insurance.
Some of the Guidelines for FHA insured loans after Bankruptcy or Foreclosure
FHA INSURED LOANS are available to people who have had both bankruptcies and foreclosures in their past. There are some restrictions, the borrower must have virtually perfect credit since the bankruptcy or the foreclosure. These loans are also subject also to normal qualifying guidelines with income and debt limitations.
- Chapter 13 Bankruptcy There must be 12 consecutive months of on time payments on all accounts (including utilities, cell phones etc) from the filing of the chapter 13 bankruptcy.
- Chapter 7 Bankruptcy There must be 24 months of perfect credit from the disposition of a Chapter 7 bankruptcy.
- Foreclosure There must be 3 years of perfect credit from the foreclosure.
{ 36 comments… read them below or add one }
Have their been any changes to the guide line for bankruptcy and foreclosure I was told by a leander that FHA had change their guide line for a longer wait after you have filed bankruptcy and foreclosure.Can you please send information on this matter.
Tracey, There are changes in the works but they are not official yet. What I have heard and this is only RUMORS is that the time period for chapter 7 may go from 2 to 3 years and that Chapter 13 may stay at the current 12 month time period. But the changes have not gone into effect and may be different from this when they do.
Tracey,
I have also heard that the proposed changes take the waiting time from a foreclosure from 3 years to 4!
Hi I went to apply for an FHA loan(last week) and they told us FHA Ch.13 guidelines are 3 years and foreclosures are 2 years? So we have to wait another year.
That is not what I have heard Amanda. We are on the verge of new policies being instituted. As of the past, Chapter 13 – one year. Chapter seven – 2 years from discharge. Foreclosure – 3 years from foreclosure. The changes are rumored to add one year to each category.
If I go into a chapter 7 BK and include my home in the BK. My credit is going to show a bk and a foreclosure. After I do this and pay everything off, will I be able to do an fha loan 3 years after? Providing I am perfect from then on?
Sean, There is not an ironclad answer. The FHA is changing their guidelines to keep pace with the volatile economic climate we are in. Right now it is RUMORED to be changing from two years from the discharge of a chapter 7 to three, and from the current 3 years from a foreclosure to four. So if these changes go into effect it will be 4 years of perfect credit.
They may change the guidelines again during that four year wait, so there are no guarantees.
My broker told us today that the fha had increased the time you have to wait until you can get a new home loan after a foreclosure from 3 to 5 years, I have been looking for information on the internet, but, I can’t find anything about this new requirement.
I applied for a FHA loan this month (February 2009) and was told by the home builders’ mortgage company it was 2 years if you had a Ch 7 and included your home in the bankruptcy. The 2 years begins when the house is sold, not when the bank takes possession of the home. In my case, the bank took possession of the home in January 2007, but it didn’t sell to the “new” home owner until October 2007. Thanks to the Clinton and the democrates who ran Freddie and Fannie into the ground with their housing policies, I’msure the time will increase. Here’s the link: http://news.yahoo.com/s/time/20090216/us_time/08599187977400
So if you include your house in the Chapter 7, is it 2 years after the discharge date or after the sale of the property?
Hello, I’m going thru a chapter 13 right now I have been making payments since Jan. 09. I have $25,000 in equity in my house with a 8.75 rate I filed chapter 13 to save my house, Is there any fHA loan I could get sonner to lower my payment???
I was told by a FHA expert that if my house was included in a Chapter 7 BK. I will be able to get a new loan 2 yeas from discharge. I got discharge Dec 07 and my house which was forclosed on sold April 08. Since it was discharged in Dec. I am no longer liable for the property so nothing new can be added to my credit report such as a Foreclosure. I am in my other house and my modification fell through and I am letting it go since it too was included in my BK. I would be eligible for a new loan in Dec even if they foreclose on me tomorrow. Remember once discharged your now liable and they cannot report anything new like foreclosure…etc to your credit report. Hope this helps. I was cofused for ahile on this too. but most banks or brokers who sell all loans including FHA in addition to dont know all the loopholes. Find a FHA lender SPECIALIST to confirm. I heard 10 different versions, even from BofA. Good luck.
sorry typo.” Remember once discharged your ‘NOT’ liable and they cannot report anything new like foreclosure”
Very useful information…here is my situation. I have included my house in the chapter 7 and already had the hearing and expecting it to be discharged by end of September per the attorney. The attorney said i can try to get the loan modified and can continue to live in the house atleast for 15 months or even more before the bank can take possession (this is the average time of foreclosure/possession these days he said). He basically advised me this because of unemployment situation and inability to pay rent etc. Now my question is if i do live in this house for say another year or so after the discharge date without making any payments to the bank, will the two year condition for an FHA loan begin from the discharge date or from the date of foreclosure/possession? Also is the attorney making a correct statement when he is saying that the average time is 15 months these days before the bank can foreclose and take possession of the house after the discharge date? I dont want to mess up the situation any further than it is now, therefore, please help me with the correct information if you. Regards.
Hello, I am confused between filing BK7 and Foreclosure. My lender was unwilling to modify my current loan and constantly given a run-around. I know in California that non-judicial is very common. This will not allow me for redemption. My question that I posed to you are as follows: I contemplated of filing chapter 13, however, my attorney informed me that we were qualified also to file for chapter 7. The caveat is to show the court that I am keeping the property and the automobile to circumvent the system. Now that my lender is unwilling to rewrite the loan and the house price is downside. We were served with a foreclosure date sale. Am I considered bankrupt and foreclosed or just bankrupt with the home returned to the lender. Where do I fall as far as FHA is concerned.
Our chapter 7 was discharged in Oct. 08. Since then we have purchased two vehicles at low interest rates. Our credit scores are around 700. Do we have to wait until Oct 10 to get a house? We are paying $1050.00 a month in rent now. That is really, really high for the area that we live in (rural southern Indiana.)
We filed bankruptcy in 9/2005, included our home. Discharged in 12/05. The foreclosure decree date is 5/22/06 and the sheriff’s sale was issued on 12/18/06. We are trying to get a FHA loan, what date do they consider the foreclosure to be final?
I filed bankruptcy ch. 13 and it was discharged in Oct. 07. I wanted to add the house before the bankruptcy was discharge but my lawyer told me that because of California laws, I didn’t have to go back and change the bankruptcy. The house was eventually foreclosed on at the around the same time of the discharge. I have paid everything on time and bought a car in Jan. 08. My current credit score is 650. About how many years do I have to wait?
PLEASE send me your advice I currently got a loan modification that simply just helps me for 1 year. I owe 546,000 on my home and now worth 350,000 I am considering filing chapter 7 and surrending the house go live at a family members home and save 2 thousand a month, we just feel like the loan mod was a temp fix and our house needs work so we rather start fresh how long will i have to wait to re-buy if we save they way we are planning to I should have 72,000 saved in 3 years.
Looking for help. BK ch 7 discharged in June 2007. Two home loans were not reaffirmed. We want out of the house now due to safety concerns and would like to sell on a short sale-offer pending not submitted to bank yet. Both home loans are included in BK with zero balances. While we stopped making house pymts 2 months ago, we are not in foreclosure and hope to do the short sale. Will the bank update my credit report to show its a foreclosure? and will they date it current or the date of my BK? Can I go out now and get a new home loan? Its been over 2 yrs from discharge and my only debts are my credit cards and one car lease (perfect credit since BK). Thanks
My ch. 13 was discharged in Sept. of 08. My house was surrendered but the foreclosure has not yet happened. Is it true that my credit report will not show the foreclosure since the debt has been discharged? How soon after the foreclosure occurs can I apply for a FHA loan? What date with the lender look at, the discharge date or the foreclosure date?
Seems many of us have the same question but no CLEAR DEFINITIVE answer. When applying for FHA loan, what date is used when you declared ch 7 and mortgage was discharged in BK? For me, CH 7 was filed 06/08, discharged 10/08 which is also the day we moved out and told the mortgage company so. Bank finally was able to sell the house (for $60,000 less then we had paid for it two years prior) 06/09. So can we get a FHA loan two year past filing date?, two years past discharge date?, two years past sale date? three years past filing date?, three years past discharge date?, or three years past selling date? Everyone gives different answer! Depressed areas have homes selling years after discharge and abandonment, so people who had to move due to job transfer and can’t sell their homes due to high foreclosure rates in their area and a serious drop in equity will be in limbo for maybe 5-7 years. If it is the latter then that seems so wrong. Why should the date of sale after Ch 7 count for anything? That sale date is totally determined by the local market and the bank’s willingness to except just how worthless the house has become, which has absolutely nothing to do with the previous owner.
As I understand it, not being a FHA lender myself, it is 3 years from the discharge of the chapter 7 if the house was included in the bankruptcy. Perfect credit after the discharge is a must!
You should verify this with your lender, and this in no way intended to be a definitive answer. The guidelines keep changing, but this is what I got from a FHA lender that I use.
I don’t think that it matters when the house was finally sold if the mortgage on the house was included in the bankruptcy.
Again, please verify this with a FHA lender in your area. I am repeating what I heard and make no warranties to the accuracy of the statement.
I filed a chapter 13 bankruptcy, it was final in Feb. of 2009. I want to know if I can apply for a loan in Feb. of 2010, and if so what does my credit score have to be and what kind of limit can I get and what terms can I get.
Thank You
Jason James
I had a foreclosure in 2009, hose was put inti auction in Aug. 2009. I stopped paying my credit cards when we defaulted on the home loan since I taught, defaulting on my home loan will affect my credit big time anyway. So, I defaulted on all my credit cards. Now I am reading that you have 2 years after foreclosure and you can apply again for a home loan. My question is, I want to pay back all those credit cards that I defaulted but would it be wise to pay them off at once or to pay them ontime on a monthly basis. Thanks.
I was wondering it has been 2 yrs after my foreclouser and I have everything pd off now. I would like to buy a house thur fha it is a manufactered house. Is there anyone out there to get a loan. or any other suggestions where to get a loan.
Talk to an FHA lender in your area. I believe that it takes three years from a foreclosure and your credit has to be perfect in that time. However FHA is revamping its rules and the underwriting guidelines change every couple of weeks, so you need to get an accurate answer from a lender that makes FHA loans in your area.
I spoke with FHA person via there 800# and you have to wait three years from the date the previous FHA Insurance paid the claim. So my house was foreclosed on in 12/2006 but they didn’t pay the claim until 12/2007 so I have to wait three years from that date to get another FHA loan.
I had a conventional loan foreclosed on in dec 08 my credit score i around 600 do I have to wait 3 years to get a fha loan
FHA keeps changing the guidelines. Today as I understand it, there is a three year wait (with perfect credit) but there are rumors that this will change to four years soon.
This past year, I went through chapter 7 bankruptcy and lost two properties in the process. The first was a rental home that I did not want to include in the bankruptcy due to some equity, but the trustee seized it as an asset and made known his intent to sell. However, he has not paid toward the mortgage and the mortgage company has started the foreclosure process, even as the trustee is preparing to sell. The second property was a Florida condo that I owned with three others. It was worth far less than the mortgage, but the mortgage was in good standing when I filed chapter 7 as well. Since then, the property mortgage and deed have not changed (I’m still officially on both) although the trustee has accepted the condo into the bankruptcy, he abandoned the property. The other owners have now stopped paying the mortgage and are weighing their options of deed-in-lieu, short sale, bankruptcy and selling out right and taking the loss. Other than this bankruptcy, my credit has been perfect for over 20 years. Base on the above, how long will it be until I’m eligible for an FHA loan? 2 years? 3 years? If it’s a certain period of time, does the time start the day I filed? The date I was discharged? The date my bankruptcy was closed or the date the last property changes hand so that my name is no longer on the deed or mortgage? I keep getting conflicting information, even from FHA lenders.
As of now my credit score is 617. I filed bankrubcy in 2003, my discharge date was Nov. 3, 2003. I have 3 medical balances total of 1166 that shows on my credit report. I’ve been late on 1 credit card 1 time and a couple of times on a small bank loan. Is there anybody out there willing to give me a loan on my house? Taxes are 76,999. I only want to borrow 30,000.
Generally the rule is that your credit has to be perfect after bankruptcy. Since it is over six years since the bankruptcy was discharged, I would sit down with a competent FHA lender and see what they say. I am not sure what you mean by taxes 76,999, and also what are the medical balances? Are they bills that you are making timely payments on or have they gone to collection? Generally speaking there can be no collections. You will normally need 12 months of ontime payments so when you had the late payments will be important.
My Chapter 7 bankruptcy was discharged Nov. 2007. The bankruptcy included a fha insured home. I am now trying to get a home prequalification loan but the lenders say that they need a letter from the fha saying the loan amount has been satisfied either by bankruptcy discharge or paid off. I called the fha and they refused to send me any kind of letter saying this. They told me I would be locked out from future fha loans until I paid the balance of the original loan and that they would continue to report this as a bad debt to collections. What can I do about this? Does this mean that the fha has blacklisted me for the rest of my life from purchasing a home?
Hi Dan, my name is Rachelle Beningo, I have been reading all these comments and questions and I was wondering if my husbands credit could be saved? We filed bankrupcty and a forclosure in 2005. Is there anyway that you can help us? We would really love to buy another home for our family! This time hopefully my husband listens to me!!!! My e-mail is rbeningo@yahoo.com or you can call me at 216-894-2136.
Sincerely bummed,
Rachelle
Rachelle,
There is definitely hope! The fundamental for getting a new loan after a foreclosure and/or a bankruptcy is maintaining a good credit history after the bankruptcy. If it is a chapter 13 then you must make your payments under the chapter 13 on time. All other payments (including utilities and cell phones etc.) should be made on time. If you did that you will probably have a pretty good chance of qualifying for that loan now. Of course your income and debt load is considered, but from a credit standpoint that is the answer. If it was a chapter 7 then all other payments must be made on time. At this point I believe it is 3 years from a foreclosure or from the discharge date of a chapter 7. Call an FHA loan specialist in your area!