Los Angeles County FHA and Bankruptcy
California Home Buyers are eligible for FHA loans in Los Angeles County even if they have a bankruptcy in their credit history. The FHA, which simply is the mortgage insurance company that insures low-downpayment loans, allows for credit blemishes…as long as a plausible written explanation is provided by the borrower.
Filing bankruptcy because you wanted to get out of the credit debt you accumulated as a young college grad is different than having six figures of medical debt due to accident or illness…or a really ugly divorce or business failure.
Los Angeles County FHA Bankruptcy Questions:
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My husband has a BK from 2008 due to his previous marriage. Can we still get an FHA loan?
Technically yes. Categorically, you need to present the facts. Can you qualify for the loan by yourself or with a co-borrower to help you? If so, we can ignore your husband’s BK by not even putting him on the loan. His credit past is irrelevant as long as he has no judgments or liens that can chase him and compromise your new home. We can’t use his income, but we also don’t have to bring his past into the loan.
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How long do we have to wait after our bankruptcy?
It depends on how you filed. Chapter 13 allows for home buying immediately after your discharge as long as your credit scores have come back up to 620, or within only 12 months of successful payment plan if the court approves it. Chapter 7 generally requires only 24 months after discharge, but can also be ignored after as few as 12 months if the extenuating circumstances for the bk are sound and not likely to recur. (medical, lawsuit not related to credit use, etc.) In both cases you will need a 620 score and no new credit problems. You have to be clean after the bankruptcy to get any leniency at all.
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Will my rate be higher because of the bankruptcy? I hear that bad scores and BK’s make your rate go up.
FHA does not penalize you for your credit history or lower scores by charging a higher rate. If you’re eligible and can get approved for an FHA loan you are treated the same as someone with a 750 score. FHA truly is equal opportunity.
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What do I need to do to get an FHA loan after my bankruptcy discharge?
You’ll need your full discharge paperwork from the courts with all schedules. You’ll need to have your credit report run to prove you’ve been “clean” for at least the last 12 months. Late payments or collections following a bk will almost always eliminate you. You’ll need to write explanations on the circumstances surrounding your bankruptcy and why those circumstances are unlikely to recur. You may also have to explain any confusions or differences between what shows in your discharge and what the credit bureaus may have in their records. It is not unusual to have discrepancies. It’s usually not a deal killer, but you want to be organized and proactive in addressing anything at all that is out of place between those two sets of documents.
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After my bankruptcy I swore off credit and have never opened any new accounts. Now what?
It may a little more difficult. If your scores have not improved to at least 620, it will take some time to get you where you need to be. Credit is a tool, we’ll show you how to use it properly. If your scores have turned to near 0, we can use alternative methods to show you pay accounts on time. It’s not easy, but it can be done. We just need to put together the story and document it, but you can still buy a home!
Brian Wiesner
Toll Free: 866-343-1579
Direct: 909-581-4075
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