Is a mortgage loan possible after bankruptcy? When it comes to FHA home loans the answer is yes, as long as the borrower meets FHA loan standards and sits out a mandatory waiting period (which may vary depending on the bankruptcy, state law, and lender standards).
One reader asked a question this week about bankruptcy and FHA loans:
“My credit rating is 677 as of 5/18/2017. My income is established by a job that Ive held for over 15 years. My bankruptcy was completed in July of 2011. Can I qualify for an FHA mortgage?”
There are many issues at work in situations like these including whether or not the borrower has established a satisfactory pattern of credit activity following the bankruptcy action.
The mandatory waiting period (under FHA standards, not lender standards or state law) has been satisfied, but the lender will be required to run a new credit check for the loan.
If the borrower has established reliable credit patterns since the time the bankruptcy was discharged, chances of loan approval are better. FICO scores are not the only requirement for FHA mortgage loan approval.
Borrowers should understand that they will have their debt-to-income ratio examined, their credit activity, and a variety of of factors reviewed to insure the loan is a good risk for the lender.
Lender standards, which vary, will also be a factor. Some issues may be more important to address with one lender but not another. State law may have a say in what is possible, especially in Community Property states where there are rules that affect borrowers in legal marriages differently thanks to how the state recognizes the financial commitments made by a legally married couple.
In short, the answer to this reader question depends on some variables not addressed in the reader’s question, and it’s always a good idea to discuss your situation with a loan officer to see what might be possible.