Guide to Qualify For FHA 203K Rehab Loans after Bankruptcy
It’s not impossible for home buyers to qualify for an FHA 203K Rehab Loan after bankruptcy. Chapter 7 Bankruptcy is the most common one which defines complete liquidation bankruptcy. This is more advantageous for customers who have many unsecured debts like outstanding collection accounts, credit card debts, judgements, and personal loans. A Chapter 7 bankruptcy release will exempt maximum customer debts. However, not all debts possessed by a governmental body can be released with this bankruptcy. Collection firms and creditors should stop all types of collection activities on every customer who has filed this bankruptcy. Well, a home purchaser can qualify for an FHA 203K Rehab Loan after bankruptcy after a waiting span of 2 years from the released date of the Chapter 7 bankruptcy.
Waiting Span Of Customers After Chapter 13 bankruptcy
A home purchaser can qualify for an FHA 203K Rehab Loan after a Chapter 13 bankruptcy after a waiting span of 2 years. Chapter 13 bankruptcy enables individuals with regular income to develop a plan to repay all or part of their debts. However, as long as it’s a manual underwriting, there is no waiting span for qualifying. But every FHA 203K Rehab loan requires the approval of an automated underwriting system.
Difference Between FHA Loan and FHA 203K Loan
FHA 203K Rehab loan combines the acquisition of the property loan and a construction rehab loan in a single loan program. This loan is beneficial for home buyers who seek to purchase a property which requires major renovations or an addition. FHA mortgage lenders finance for the property and its renovation expenses. As per mortgage lenders, FHA 203K Rehab loans are riskier as mortgage rates on these loans are 0.50% higher than standard FHA loans. All FHA policies which apply on standard FHA loans like FHA loan requirements, FHA instructions on Collection Accounts, and the waiting period after foreclosures and bankruptcy apply to qualify for FHA 203K loans.
Go For Housing Counselling
In case you qualify for the ‘Back to Work’ program and don’t require waiting for the time span required after filing for bankruptcy, you’ll need to undergo housing counselling. This helps understand what you will get into and to ensure you can afford this loan. It’s an additional precaution for you and the lender to make sure that you can become a successful home buyer again.
If you are a home purchaser and seeking an FHA 203K mortgage lender for buying a fixer-upper, contact Drew Mortgage Associates, one of the recognised mortgage lenders in Massachusetts.