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Mortgage during Chp 13

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  • Mortgage during Chp 13

    I am 14 months from the end of my chapter 13. I have a good job and never missed a payment. I have been renting for two years and would really love to build or buy a new home.

    What are the chances that I would be approved for a loan? Where do I even start looking? Help, please!

  • #2
    You can qualify for a FHA mortgage after making your plan payments on time for 1 year. The trick is finding a lender who does not have more strict standards. You sill need a down payment which is often an obstacle for somebody in a Chap 13. A good place to start is to talk to a mortgage broker with experience working with borrowers in Chap 13.
    Last edited by LadyInTheRed; 06-29-2014, 01:23 PM.
    LadyInTheRed is in the black!
    Filed Chap 13 April 2010. Discharged May 2015.
    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


    • #3
      It really depends on two things.

      First, you must otherwise qualify for a loan. FHA will, in fact, loan to Chapter 13 debtors that are still in an active bankruptcy. The minimum score for an FHA loan is 500, but you must remember that the actual lenders may require a higher score. If your score is over 600 (or better yet, 620) while in your active Chapter 13, it is possible to qualify with those scores.

      Second, your Chapter 13 payments must have been on-time for the entire year preceding the application and the Trustee must approve. If your Chapter 13 is paid through a Wage Deduction, then you should have no problem showing that you haven't been late paying. If you pay directly, make sure you are not paying even a day or two late. Additionally, the Trustee must approve your goal.

      Third and finally (yes I said two things), you need to otherwise be able to afford this purchase. In most cases, it can't substantially exceed what you're paying now for housing or "upset" what the unsecured creditors are receiving. (Don't ask me what "substantially" means since it's subjective and the Trustee or Judge are the ones you need to convince.) For example, you must consider taxes and insurance. You need to also account for upkeep and maintenance. This could make it a little more difficult to work with your existing plan. Remember your plan must remain feasible and you will probably receive an objection if you attempt to deny the unsecured creditors what they are currently slated to receive.

      I don't think it's really simple, but there are debtors that were able to purchase (and refinance) a home while in a pending Chapter 13 bankruptcy. Your consideration will also be on the APR rate you receive for your mortgage.
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog

      I am not an attorney. Any advice provided is not legal advice.


      • #4
        Thank you both so much for the info.

        My payments are deducted from my paychecks so that shouldn't be an issue. My credit score is currently 610.

        My rent under the current plan is $1050. I was planning to keep a house payment in that price range.

        I was thinking of taking money from my 401k for the downpayment. Either that or sell some of the property tied up in the 13 case. I'm not sure if that would be allowed though...


        • #5
          If you're thinking about applying for a mortgage while your Chapter 13 Plan is still active, you may want to reconsider. In many places, you need court approval to take on new debt while you're in an active Chapter 13 case.
          I am a lawyer licensed to practice in NY and CA, but I'm not your lawyer unless we have a signed agreement that says so. Nothing in this post should be considered legal advice.


          • #6
            Yes, I am planning to work this through the proper channels with my lawyer and trustee.

            After many many NO's from lenders I may have found one that is willing to work with me! Crossing my fingers...


            • #7
              I went on lending tree and was able to find 3 lenders that finance during ch 13. My credt score was a tad higher than yours about 640-650. I was pre-approved by all 3. That was about the same time as you (13 months left) but I didn't end up buying until I paid off the bankruptcy. Nothing really to do with the financing I just couldn't decide on what to buy and where. One other trustees biggest concern was the impact of the mtg pymt. He didn't care what the bank said I could afford. I ended up buying a place that was about 200/month less than I was paying in rent. But my lawyer knew exactly what the trustee would approve or not so I would say talk to your lawyer


              • #8
                Hey! Not sure if you already got your loan handled.

                I'm still excited about getting my loan!

                Not sure about during plan, but I got my mortgage right about 4 months after discharge. Got a letter in the mail from Peoples Bank based in Mississippi. They said they have a specific mortgage division (that was located in South Carolina) just dealing with people that have had a bankruptcy. Frank was my loan officer and got it done. Good rate, too. Frank's number is 843-606-6057. I always include his info. as he has asked for referrals several times!!


                • #9
                  WE are doing a HARP refi now. Have 2 more years left in our ch 13 . There are a lot of hoop's to go jump thur.

                  We are how waiting to get court approval. Everyday something new is needed.
                  After 9 lenders I found one that can do it. Most of the lenders had there on overlays. We are using Loan Depot, They seam to have less overlays and know how to do mortgage's in BK.

                  We'll see .... so YES you can get a mortgage during a ch 13. Good Luck


                  • #10
                    Curious if the courts approved you for a loan?


                    • #11
                      Originally posted by Staceyt View Post
                      Curious if the courts approved you for a loan?
                      Yes... Got approval took about 45 day's. Now we are waiting on Suntrust , to do the resubordintion on my 2nd.
                      Hope to know something this week. Suntrust has had it almost 45 day's.


                      • #12
                        For any of you out there looking for a loan during active 13...we were approved via court and bank. We moved into the house 5 months before my final payment.


                        • #13
                          WAY TO GO..!!!!

                          MY refi blew up at the very end, my mortgage co [SETERUS] messed up my payment history. Trying to get it fixed now.

                          Think I would do 3 root canals than deal with Sererus. What a messed up co.


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