I want to buy a home in St. Louis, but I declared bankruptcy a few years ago. What can I do?
The following is copied from FHA’s Mortgage Credit Analysis handbook. This handbook helps underwriters approve mortgage loans. An FHA loan can be obtained one year after the discharge of a bankruptcy provided that the bankruptcy was caused by extenuating circumstances beyond the borrowers control. Even if the bankruptcy was not caused by extenuating circumstances, a loan can be obtained after 2 years of good credit from the discharge date.
Many lenders are unwilling to work with challenging credit situations. But a lender who is willing to put forth a little extra energy to explain to FHA why the bankruptcy occurred can help someone buy a home who otherwise would be trapped in an apartment. If you need a lender, call me. Russ 314-267-2636 (24/7)
And if you’d like to start searching for a St. Louis home, click here.
From the Mortgage Credit Analysis handbook for FHA 4.C.2.
g. 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 reestablished 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.
Note: The lender must document that the borrower’s current situation indicates that the events that led to the bankruptcy are not likely to recur.
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