January 14, 2015
A reader asks, “My husband went bankrupt and it was discharged on may 7,2013 since then we have been bringing his credit up to 620 and my score is around 770 my question is on what month or day can we apply for a FHA loan and is our score good enough?”
Unfortunately the answers to these questions depend greatly on a number of factors including lender standards. The waiting period following a bankruptcy–how long the borrower must wait before being allowed to apply for a new mortgage–depends on the type of bankruptcy and lender standards. FHA loan rules do provide a minimum waiting time depending on the type of bankruptcy, but these wait times are also dependent on circumstances.
For example, here are the FHA loan rules for Chapter 7 bankruptcy:
“A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have
• re-established good credit, or
• chosen not to incur new credit obligations.
An elapsed period of less than two years, but not less than 12 months, may be acceptable for an FHA-insured mortgage, if the borrower
• can show that the bankruptcy was caused by extenuating circumstances beyond his/her control, and
• has since exhibited a documented ability to manage his/her financial affairs in a responsible manner.”
As you can see, much depends on what the borrower has done post-bankruptcy, and the lender does have the ability to exercise discretion in approving or denying credit based on the borrower’s post-bankruptcy credit details.
It’s best to talk directly with the lender about these issues to see what your options might be.
Do you have questions about FHA home loans? Ask us in the comments section. You can also follow us on Facebook.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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