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Can you qualify FHA loan after chapter 7 bankruptcy?

I filed chapter 7 bankruptcy four years ago. Although I did not reaffirm my mortgage, I still make payments on the house. Can I still qualify for an FHA mortgage if I let the home go? The mortgage does not appear on my credit report.

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

I want to answer your question but there are some issues in your situation that are confusing. With better clarity on these issues I can provide a more informed response.

The main issue that will determine if it is possible for you to get a mortgage today is what happened to the mortgage on the home that you owned during your bankruptcy and who holds legal title to the home today. So the key questions that will determine your ability to qualify for a mortgage today are:

1) What happened to the mortgage on the property after your bankruptcy?  

2) If there is currently a mortgage against the property, are you listed on the Deed of Trust for the mortgage? In other words, who is legally responsible for the mortgage?

3) What is the outstanding mortgage balance and amount of delinquencies, if any?

4) Did the lender foreclose on the property?

5) What party legally owns (holds title to) the property today?

If you remain on the Deed of Trust then you are likely responsible for the mortgage and for curing any delinquencies, even if you did not reaffirm the mortgage and it does not appear on your credit report. If you are not on the Deed of Trust then perhaps the property was foreclosed on during your bankruptcy. With a foreclosure, however, property title is transferred from the borrower to the lender and it sounds like that may not have happened in your case because it would be unusual for you to live in the property four years after a foreclosure.

My concern is that you do legally own the home and are responsible for the mortgage (because you are named on the Deed of Trust). In that scenario, if you "let the home go" today and stop making the payments, you could trigger a foreclosure. A pending foreclosure would definitely prevent you from qualifying for a mortgage. Additionally, if you currently own a home with outstanding mortgage delinquencies against the property then it will be impossible for you to get a new mortgage until you resolve the delinquencies and bring the mortgage current.

Please note that lenders impose waiting periods following derogatory credit events such as a bankruptcy, default or foreclosure and the length of the waiting period varies depending on the type of event. For example, for a Chapter 7 Bankruptcy the waiting period is four years for a conventional mortgage and two years for an FHA or VA mortgage. The waiting period following a foreclosure before you can apply for a mortgage is typically seven years for a conventional mortgage, three years for an FHA mortgage and two years for a VA mortgage. The waiting periods are shorter if you experienced an extenuating circumstance such as a job loss, medical illness or divorce that contributed to the derogatory credit event. We provide a comprehensive overview of the mortgage waiting periods following negative credit events on FREEandCLEAR that you should review.

In your case, you are four years removed from your bankruptcy (and possible yet unlikely foreclosure) which means you should be eligible for an FHA Mortgage. You do not want to do anything, such as trigger a foreclosure, that undermines your ability to qualify for the loan.

My recommendation is that you determine the answers to the five questions I outlined above and then contact multiple lenders to understand how they would handle your unique situation. You can review lenders by clicking INTEREST RATES We advise you to contact at least four lenders as as qualification guidelines vary. Plus, comparing lenders is the best way to save money on your mortgage.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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