Getting FHA Mortgage Approval After Bankruptcy to Buy a Home

by Brian from Maryland

Ask Kate about getting FHA mortgage approval after bankruptcy: Brian is trying to buy a home to live in with his two young sons. Even though 3 years have passed since his bankruptcy, he can't get FHA financing. He asks how to get on the path to homeownership.


Ask Kate: FHA Mortgage Loan Denied 3 Years After Bankruptcy

By Brian in Maryland

Getting FHA Mortgage Approval After Bankruptcy to Buy a Home

I have been divorced 5 years and have 51 percent custody of two small boys. I recently applied for a loan to purchase a Condo for $119,00 but was turned down by FHA.

I did file for bankruptcy 3 years ago and my ex-spouse wanted sole control of the house we'd purchased. The bankruptcy came back positive for me to include the house loan with my ex-spouse and she hasn't made a payment in six years.

I really have a good job and make good money but I just want a small loan to buy a condo for my Sons and me.

Is there anything you can suggest or put me for the right path? Thank You so much for your most valuable time.

***zz-portrait-left.shtml*** Kate's Answer: FHA Mortgage Loan Denied 3 Years After Bankruptcy

Hi Brian,

Getting FHA loan approval after the discharge of a chapter 7 bankruptcy is possible after a 12 month waiting period if the borrower can document that the reason for the BK was beyond their control. These reasons are called extenuating circumstances, for example, a serious illness, death of a spouse, or a natural calamity.

Re-Establishing Credit to Get FHA Loan Approval

In the absence of being able to sufficiently document that the bankruptcy was beyond control, borrowers will find that many lenders will require at least a 24 month waiting period before approving a new FHA mortgage request.

In both scenarios, the borrower should have re-established credit, not an easy feat for anyone in 1 to 2 years, much less after a bankruptcy.

One way to jump-start credit is to get a secured credit card, use it for necessities, and pay the balance in full each month. See How to Improve Your Credit Scores With Lasting Results for my answers to Sergio's and Suzanne's questions about credit.

The problem you are running into, if I understand the situation as you described, is that your house could have been included in the bankruptcy, which would have resulted in foreclosure. But instead, your ex-spouse retained the ownership of the house yet somehow hasn't made monthly payments in 6 years. Because you are still named as a co-borrower on the mortgage, your credit continues to suffer, even after the bankruptcy.

FHA Back to Work Program

I have 2 suggestions. One is to consider FHA Back to Work Program which shortens the waiting period to buy a home after bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. However, the program's availability is not open ended. As of May 3, 2016, the FHA Back to Work Program comes to a close this September.

Short Sale or Mortgage Assumption Modification

If FHA Back to Work is not an option for you, my other suggestion is to have a heart-to-heart talk with the holder of the financing on the house. You could ask why they allow the mortgage to go unpaid for 6 years, all the while wreaking havoc with your credit. Perhaps thay would approve a Short Sale or a Mortgage-Assumption-Modification.

Not to say that short sale or loan modification do not lower credit scores for a few years. But at least these programs would give you the opportunity to get your name off a delinquent mortgage, re-establish credit, and eventually obtain financing to buy a house for your sons and you to call home.

Wendy's bankruptcy was discharged over 4 years ago. When might she be eligible to refinance her current FHA home loan? See FHA Refinance Approval After Bankruptcy (Chapter 7 and Chapter 13) and Loan Modification for the details.

Best wishes for your future,


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