CHAPTER 13 BANKRUPTCY
FHA will consider approving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee's written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.
CHAPTER 7 BANKRUPTCY
At least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.
SHORT SALE / PRE FORECLOSURE SALE
FHA does not currently have a policy regarding the time required to reestablish credit and obtain a new FHA loan after a short sale. However, the borrower must be able to qualify using standard FHA guidelines including the fact that they typically cannot have any late payments on their mortgage for the previous 12 months.
Although this is the official FHA policy, many lenders have heard that FHA currently will not insure a new loan application from a borrower with a short sale that is less than three years old. Many of the individual banks and lenders have implemented their own policies regarding the waiting period after a short sale. I have seen a typical range between two and three years. We anticipate that FHA will issue a written policy regarding short sales with more liberal guidelines in the near future.
FORECLOSURE
FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous four-five years. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another.
