The collapse of the subprime mortgage industry in 2008, during The Great Recession, which lasted from late 2007 to mid-2009, brought about massive financial downfalls experienced by the majority of the people. As a result, unemployment skyrocketed by 10% coming from just half that percentage. It was also reported that the summed wealth of an estimated 60% of Americans depreciated significantly. Needless to say, foreclosures and a lack of sales ensued. Bankruptcies unrelated to business also peaked in 2010.
Positively, the economy has gone through some form or recovery, although still polarising to many. What’s important is that millions of Americans are slowly but surely learning to stand up again and slowly affording properties with the help of home loans.
Understanding Bankruptcy and FHA Loans
Bankruptcy is no longer as stigmatized as it used to be. The FHA now permits potential borrowers to be eligible for a loan as long as the chapter 13 bankruptcy has been discharged. FHA guidelines also dictate that these borrowers must not have had late payments in the last 12 months. Conversely, a chapter 7 bankruptcy calls for a
FHA and Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is the type wherein the debtors propose a repayment plan to make installments to creditors over a period of time, typically between three to five years. The workaround is that debtors are permitted to maintain ownership over a particular property. This kind of bankruptcy usually consists of combining debts into a single account held by a trustee, or the court of law. It is commonly called the “wage earner’s plan” that allows people with a steady and regular income to develop a logical plan to repay all or part of their debts.
Those going through this can qualify for an FHA-insured loan while the bankruptcy is still open. The borrower MUST have paid at least 12 months from the initial pay-out period AND MUST have permission from the trustee. They should get a letter from the trustee allowing them to purchase a home.
FHA and Chapter 7 Bankruptcy
Contrary to Chapter 13, this bankruptcy form is open to anyone who may or may not have a steady income. Another difference between both chapters is that businesses can file for chapter 7, also known as liquidation. Used to discharge unfinished debts such as credit cards and utility bills, this bankruptcy form is classified by property that is sold to pay off existing debt; ones not included are alimony, child support, certain taxes, and student loans.
Those going through this can qualify for an FHA loan two years after the discharge. Again, it is imperative that borrowers have re-built their credit in the allowed timespan.
FHA Online Application
Because of modern times, one may now submit necessary documents online. To avoid the hassle, search for a lending firm that you feel right about and that understands your vision. There are several FHA lenders available online, but the best FHA home loans given by the leading lenders are determined by a buyer’s specific wants and needs. For more FHA loan after bankruptcy trivia and other FHA concerns, click the link.