FHA Loan Articles
News, updates, and explanations to keep you informed.
FHA Loan Rules for Unemployment and Bankruptcy
Consider the following scenario: a potential FHA loan applicant has a foreclosure as part of a Chapter 7 bankruptcy case discharged just under three years prior to the loan application. The borrower also lost his or her job around the same time, but went back to work after a gap in employment.
Does this FHA loan applicant have a chance to get a new FHA home loan with these issues as part of his or her recent history?
FHA loan regulations require borrowers to wait a minimum of two years before applying for a new FHA mortgage after Chapter 7 bankruptcy. Similar minimum wait time requirements apply for foreclosure proceedings. This waiting time is known as a "seasoning period" and many lenders go beyond the FHA minimums and require a three-year wait.
These longer wait times are not illegal or prohibited by FHA loan rules. Once three years since a Chapter 7 bankruptcy is discharged, many lenders will consider a borrower for a new FHA mortgage. The borrower must qualify for the new FHA mortgage loan in the same way he or she would for any other home loan application and show good credit since the time of the bankruptcy and/or foreclosure.
When it comes to gaps in the work history, FHA rules require an explanation, but significant work history (a year or more) since the date of the unemployment should be enough to offset the gap presented in this scenario.
As with all aspects of FHA home loan applications, the borrowers specific circumstances play a big part of this--what is considered a problem for some borrowers may not be an issue for others depending on other factors such as credit history, the nature of the employment, and the reasons for gaps in the employment record.
Also, the lender must verify current income and employment to judge whether current work is stable and "likely to continue". Simply having a new job or a recent change in employers is not enough to disqualify you from an FHA guaranteed loan.
These types of situations are handled case-by-case--never assume you are ineligible for an FHA loan until you have been denied or told you aren't eligible by a lender or FHA representative.
FHA NEWS and RELATED ARTICLES
Some FHA loan applicants come to the application process wanting nothing more than to make their down payment and get into their mortgage. But other borrowers approach their FHA mortgage with a pre-payment strategy.
Some of the most frequently asked questions about making a new home purchase using an FHA guaranteed mortgage loan involve the issue of the down payment.
Borrowers who have experienced financial trouble and wind up selling their property in a short sale arrangement often recover from their difficulties and feel ready to become homeowners once more.
Earlier this year, the FHA and HUD issued a press release about changes to the FHA mortgage insurance policy. The new policy will include alterations to current mortgage insurance premium policy and how long such policies remain in effect.
If you're applying for a first-time FHA home loan, you're likely wondering how long your mortgage will be and what kinds of options you might have for shorter or longer loans, early payoff or what happens if you just pay the monthly mortgage minimum.