October 23, 2012
A reader asks, “My bankruptcy has been discharged for 3 years but the house has not been foreclosed on yet. Can I get an FHA loan?”
There are several unanswered questions here that don’t allow a definitive answer. The nature of the bankruptcy (Chapter 7 or Chapter 14) plays a part in the answer. Is the house in foreclosure now? More information is needed to provide a clear answer.
In general, FHA loan rules do require a “seasoning period” for bankruptcy and foreclosure. A home that is currently in foreclosure will likely interfere with a borrower’s attempts to get a new home loan of any kind.
A home purchased with a government-backed loan that has been foreclosed upon may result in the borrower being indebted to the government. VA loans, for example, may hold the borrower responsible for the debt and refuse to allow a borrower to apply for a new VA loan until that indebtedness is resolved to the satisfaction of the government. If a borrower’s home has been foreclosed upon and the mortgage was a Fannie Mae or Freddie Mac, the borrower would be required to meet the requirements of those programs if a debt is involved as a result of the foreclosure.
In any case, before a borrower can apply for a new loan, the FHA minimum waiting time for a foreclosure or bankruptcy (or both, in this case) is not the only factor. Any lender will have specific requirements in this area that may exceed FHA minimums.
This is permitted under FHA loan rules. The bottom line–borrowers who experience bankruptcy and foreclosure should not expect to get into a new home loan soon after those proceedings.
Do you have questions about FHA home loans? Ask us in the comments section.
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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