FHA loan rules for getting new loans when it comes to bankruptcy allow the lender to exercise some discretion depending on circumstances, but depending on the type of bankruptcy a borrower may also need the court’s permission to apply.
Borrowers in Chapter 13 bankruptcy have some options according to HUD 4155.1 Chapter Four Section C which states:
“A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that
–one year of the pay-out period under the bankruptcy has elapsed
–the borrower’s payment performance has been satisfactory and all required payments have been made on time, and
–the borrower has received written permission from bankruptcy court to enter into the mortgage transaction.”
The reader didn’t provide any additional information as part of the question so it’s difficult to ascertain whether the circumstances he or she is in currently would allow a refinance loan to go through. The most important thing for a reader to do in situations like these is to find a participating FHA lender willing to work with someone in a Chapter 13 and discuss the options.
As mentioned above, written permission is required for borrowers who meet the other criteria, so a potential borrower may wish to work on that detail in the early stages of researching the new loan.
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