Bankruptcy

Bankruptcy

In fact, even if you have had credit problems, such as a Chapter 7, it's easier for you to qualify for an FHA loan. FHA allows you to refinance or purchase a house after bankruptcy.

Chapter 7

At least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7, according to FHA guidelines. This is not to be confused with the 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.

Chapter 13

FHA will consider approving a borrower who is still paying on a Chapter 13 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.

A perfect credit score is not needed for an FHA loan approval. In fact, even if you have had credit problems, such as a Chapter 13, it's easier for you to qualify for an FHA loan than a for a conventional loan. Sometimes scores down to 530 are accepted if there are compensating factors that offset the credit risk.

Minimum Credit Score

On January 20, 2010 FHA announced a policy change to address risk and strengthen finances. FHA changed the minimum credit scores for new borrowers:

• New borrowers will now be required to have a minimum credit score of 580 to qualify for FHA's 3.5% down payment program
• New borrowers with less than a 580 credit score will be required to put down at least 10%
• This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well
• This change were posted in the Federal Register in February 2010 and after a notice and comment period, went into effect in 2010

What documentation will I need?

• Personal tax returns for the past 2 years
• Current pay stubs for the past month
• Bank statements for last 2 months (all pages)
• Latest retirement statement for each active account (all pages)
• Sales contract (purchase)
• Clear copy of Driver’s License (front and back)
• Clear copy of SS card (front and back)
• Addresses and loan information of other real estate owned (if any)

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