FHA Refinance After Bankruptcy

FHA Refinance After Bankruptcy

FHA loans allows refinance after bankruptcy. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA than a conventional loan.

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.

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.

Credit Score

A perfect credit score is not needed for an FHA loan approval. In fact, even if you have had credit problems, such as a bankruptcy, 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.

Generally, a borrower who has made timely payments for the last 12 months serves as a guide and demonstrates their willingness to repay future credit obligations. New FHA Policy changes require minimum FICO score to be 580 for 96.50% loan-to-value and anyone refinancing with a score lower than 580 will require 90% loan-to-value. These FICO requirements will go into effect in the spring 2010. However, individual lenders will still require credit scores higher than 640.

What documentation will I need?

• W2's for the past 2 years
• Current pay stubs for the past month
• Bank statements for last 2 months for each active account with sufficient reserves (all pages)
• Latest retirement statement for each active account (all pages)
• Residence addresses for past 2 years (if you reside at your current address for less than 2 years)
• Recent mortgage statement (s)
• Homeowners declaration page
• Clear copy of Driver’s License
• Clear copy of SS card
• Addresses and loan information of other real estate owned (if any)
• Personal tax returns for the past 2 years, current income statement & balance sheet for business (self-employed only)

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