Can I Get an FHA Loan While in Chapter 13 Bankruptcy

In this article, we will cover and discuss homebuyers and homeowners qualifying for an FHA loan while in Chapter 13 bankruptcy. Today, we have the hottest housing markets in the United States. Home prices in most parts of the nation have been surging during the past several years. Many potential homebuyers who are in an active Chapter 13 bankruptcy repayment plan can qualify for an FHA loan while in Chapter 13 bankruptcy, so they do not have to be priced out of the housing market.

Buying Your First Home with an FHA Loan While In Chapter 13 Bankruptcy

The United States has many beautiful places on Earth to buy a home. Many states like Hawaii, California, Oregon, and Alaska also have one of the highest housing prices in the nation. If you are in an active Chapter 13 bankruptcy, you do not have to wait until the discharge of your Chapter 13 to be eligible for a mortgage loan. You can qualify for a house one year into a Chapter 13 bankruptcy repayment plan.

Surging Home Prices and Low Inventory

Home prices have been steadily increasing year after year. Mortgage Lenders for Bad Credit Lenders have no lender overlays on government and conventional loans. We can help homebuyers with credit scores down to 500 FICO to qualify for a VA and FHA loan while in Chapter 13 bankruptcy repayment plan with a manual underwrite.

FHA Loan Limit

The United States Department of Housing and Urban Development (HUD) is the giant federal agency that administers FHA loans through the Federal Housing Administration (FHA). HUD, the parent of FHA, is the federal agency in charge of the administration and guidelines on FHA loans. HUD is also in charge of administering loan limits on FHA loans.

High-Balance FHA Loan While in Chapter 13 Bankruptcy in High-Cost Areas

There are two separate loan limits on FHA loans. Standard and high-cost loan limits. Most of Hawaii, California, and Alaska is classified as high-cost areas. High-cost areas have higher FHA loan limits. FHA loan limits for 2025 in the standard median-priced area are $524,225 on single-family homes. High-cost FHA loan limits  are capped at $1,209,225 on single-family homes. FHA loans in high-cost areas are called High-Balance FHA Jumbo Loans.

How Long After Chapter 13 Can You Buy a House?

Your bankruptcy must be either discharged or dismissed to qualify for a conventional mortgage. And there’s a waiting period: Two years after the Chapter 13 discharge date. Four years after the Chapter 13 dismissal date.

Can You Get an FHA Loan While in Chapter 13 Bankruptcy?

VA and FHA loans are the two government loan programs that allow borrowers to qualify for a home loan during Chapter 13 bankruptcy repayment plans. VA and FHA have the exact same mortgage underwriting guidelines for Chapter 13 bankruptcy.  All VA and FHA loans during Chapter 13 Repayment Plans are manual underwrites.

Manual underwriting is required because the automated underwriting system will not render an approve/eligible. Over 30% of our borrowers are folks in a Chapter 13 bankruptcy repayment or those who recently got their Chapter 13 bankruptcy discharged. In this article, we will discuss and cover qualifying for an FHA loan while in Chapter 13 bankruptcy.

Can A Borrower Currently Be in a Chapter 13 Bankruptcy and Still Get Financing?

Chapter 13 bankruptcy Mortgage loans are a possibility with FHA and VA loans. The Department of Veterans Affairs and HUD allow borrowers to obtain mortgages during a Chapter 13 bankruptcy. A Chapter 13 bankruptcy is sometimes called reorganization bankruptcy, meaning consumers are trying to pay back their debts over an extended period.

VA and FHA loans are the only two loan programs that allow borrowers in an active Chapter 13 bankruptcy to be eligible for a mortgage. Since not everyone qualifies for VA loans, we will cover qualifying for an FHA loan while in Chapter 13 bankruptcy in this blog.

How Soon Can I Apply for an FHA Loan While in Chapter 13i?

Typically, they will enter into a 60-month payment plan, sometimes shorter. As long as petitioners have made 12 payments to Chapter 13 bankruptcy, obtaining a mortgage loan is possible. Homebuyers must have permission from the trustee to enter into the new mortgage. Trustees must approve the terms.

FHA Loan While in Chapter 13 Bankruptcy With Late Payments

When are you late on your Chapter 13 bankruptcy? Being late on your Chapter 13 bankruptcy is never a good thing. Sometimes being a few days or even a week late may not go noticed by the bankruptcy trustee.  As long as bankruptcy payments are there before they distribute creditor payments, they may not notice.

HUD Late Payment Guidelines During Chapter 13 Bankruptcy

Late payments to the Chapter 13 bankruptcy may result in Chapter 13 bankruptcy being dismissed. At this point, creditors can come back to petitioners. If petitioners do go late, they run the risk of the trustee not paying their auto loan or even their mortgage on time. In many instances, consumers need to pay the trustee directly for these installments or mortgage loans.

FHA Loans With Late Payments

You can have prior bad credit and unpaid collections, but you need to be timely on all of your payments in the past 12 to 24 months. This is key to getting an FHA loan. It will be difficult for borrowers to get an FHA loan approval with late payments in the past 12 to 24 months. It is very common for late payments to appear on credit reports.

This holds true even after petitioners have declared bankruptcy. According to Experian, late payments will report on the consumer credit report for 7 years before they fall off. Bankruptcies are public records. Chapter 13: Bankruptcy will stay on the consumer credit report Sevenfold. Chapter 7 bankruptcy will report on the credit report for 10 full years.

FHA Loan While in Chapter 13 Bankruptcy With Late Payments

Can you buy a house if you’ve been late on your Chapter 13 bankruptcy payments? Yes, it is still possible to qualify for an FHA loan while in Chapter 13 bankruptcy or VA financing even after a late payment on Chapter 13 per VA and FHA agency guidelines with late payments.

• Must have 12 up-to-date payments
• Even if consumers missed a payment during the chapter 13 repayment
• As long as the last 12 payments have been on time, borrowers should be okay to proceed
• The underwriter has discretion on a manual underwrite
• So, having compensating factors will help loan approval

What Are Compensating Factors For Manual Underwriting

Examples of compensating factors include:

• Such as money in the bank after a down payment
• Longevity on job
• Low debt-to-income ratio
• Larger down payment
• Low payment shock
• non-borrowing spouse with income

FHA Loan Manual Underwriting with Late Payments

Manual underwriting defines late payments differently depending on the type of account. See the snippet below; you can see the difference between housing expenses, installment debts, and revolving accounts. For a VA and/or FHA mortgage, the last 12 housing payments (mortgage or rent) must be on time.

HUD Late Payment Guidelines on Manual Underwriting

Borrowers are not allowed to have more than two 30-day late payments within the past 24 calendar months. The guideline is slightly more confusing for revolving and installment debt; a late payment or two does not mean you will automatically be denied. As shown above, major derogatory credit is defined as ONE 90-day late payment or THREE 60-day late payments on any installment or revolving account.

What Happens If You Are Late on Your Chapter 13 Payments?

FHA Guidelines With Late Payments During Chapter 13, bankruptcy could be interpreted as the 12 months of a payout being reviewed for timeliness. Borrowers may receive some static around the interpretation of the guideline. Loan Officers would submit the file with a strong Letter of Explanation (extenuating circumstances) from the borrower for being late to pay the BK courts more than 12 months ago.

Without all of the documentation and LOE to review, we cannot promise that an underwriter of review would agree. Mortgage Lenders for Bad Credit is one of the very few mortgage companies that will accept late payments during the Chapter 13 Bankruptcy Repayment Plan. Many lenders will not touch any borrowers with late payments during the Chapter 13 Bankruptcy Repayment Plan for seven years.

How To Qualify For FHA Loan While in Chapter 13 Bankruptcy

Borrowers currently in a Chapter 13 bankruptcy or recently discharged from your Chapter 13, please reach out to us at Mortgage Lenders for Bad Credit for help with your mortgage needs. The team at Mortgage Lenders for Bad Credit is experts in manual underwriting and qualifying borrowers with Chapter 13 bankruptcy.

FHA Bad Credit Lenders With No Overlays

Mortgage lenders for bad credit have no lender overlays. Our team prides itself on helping clients buy their dream homes. For some reason we cannot get you qualified today, but we will put you on a plan to get you qualified as soon as possible. We work with many clients for 3, 6, or even 12 months before we get them into their new house. Please read our reviews and success stories. Mortgage Lenders for Bad Credit will be your mortgage experts for life! For any further details, please contact Mike Gracz at (800) 900-8569 or text for a faster response. Or send an email to alex@gustancho.com. The team at Mortgage Lenders for Bad Credit is available 7 days a week, evenings, weekends, and holidays.

FAQ’s on Can I Get an FHA Loan While in Chapter 13 Bankruptcy

Getting an FHA loan while in Chapter 13 bankruptcy is possible, but certain conditions must be satisfied. HUD, the parent government agency of FHA, has set guidelines that permit individuals to become eligible for an FHA loan while in Chapter 13 bankruptcies to seek mortgages fiscally during specific periods.

Here’s what you need to keep in mind

Time Requirement:

• You must be in a Chapter 13 repayment plan for at least 12 months and maintain all scheduled payments.
• After one year of on-time payments, the borrower is eligible.
• HUD’s minimum requirement is to be in a plan for a year, with payments made consistently and on time.

Court Approval:

• A court order approving a file is necessary to execute a new mortgage transaction.
• Your finances are under judicial supervision during Chapter 13, and new debt is only possible with the approval of a court-appointed trustee or judge adjudicating the case.

Trustee Payment History:

Documentation from your bankrupt trustee that you have paid all Chapter 13 plan payments due each month for a minimum of 12 months will be required. This shows that a person can manage finances responsibly in a bankruptcy situation.

Credit and Debt-to-Income (DTI) Ratio:

• Even if bankruptcy damages your credit score, FHA loans are more forgiving than conventional counterparts.
• HUD has no minimum credit score policy, but some lenders have their requirements (often around 580-620).
• Your ratio must also comply with FHA’s benchmarks.
• Usually, this can’t exceed 31% front-end and 43% back-end debt-to-income ratios.
• However, exceptions may be made under certain conditions with compensating factors.

Stable Income:

• You must have a stable, verifiable income to qualify like any other applicant.
• A lender reviews whether your financial means can support the Chapter 13 payment plan and the new mortgage.

Manual Underwriting:

• Given your active bankruptcy, the loan will likely undergo manual filmmaking instead of automated approval.
• This entails that the lender scrutinizes your finances, payment history, and risk assessment with the loan.

If these criteria fit for you, consider an FHA loan. They may guide you through the required documentation and assess eligibility based on unique circumstances. Contacting an FHA-approved lender who understands working with people in Chapter 13 bankruptcy is best.