Profile picture for bostonitalian2001

Alternative to FHA Loans after Chapter 13?

I'm expecting a chapter 13 discharge this summer and I know that the FHA loan is a possibility shortly after (or even during the ch 13) but I was wondering if there is an FHA alternative to avoid the super high mortgage insurance premiums that come along with an FHA loan? 

I would be putting down between 10-15 percent and would love to not have to pay MI for the life of the loan as now required under FHA. 

Some specifics: 
Chapter 13, all payments to trustee and mortgage paid on time
fico of 660-700
160k income
same job for years
225 in retirement/savings
few open credit cards (with minimal balances)

Ideally I'll be buying a house in Massachusetts priced around 400-500k. The FHA estimator shows a rate around 4.5% with MI of around 450/month. Would there be such thing as a "not too sub-prime lender" that would maybe have a slightly higher rate but not as gouging of MI? Using the online calcs something with a 5% rate and less of MI might be a better payment but I didnt know if it would be possible to qualify. Everything I've ready says conventional financing is possible after 2 years from discharge date (FHA is possible during - after 1 year of making payments). 

Thanks
  • January 27 - Boston
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Answers (7)

Profile picture for bostonitalian2001
Is there anyone that has actually closed on a successful mortgage soon after a chapter 13 discharge in Mass? 
  • April 08
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FHA is your best route because it has the shortest waiting period. As you know, you can obtain an FHA loan during a Chapter 13 bankruptcy as long as you have made 12 months of satisfactory Chapter 13 plan payments, but you must have bankruptcy court approval to get the loan. You must also provide an explanation of the bankruptcy. Although there is an exception for FHA loans. There are also conventional loans, but they have the longest waiting periods. If you want a conventional loan, you must wait two years after receiving a Chapter 13 discharge. If your Chapter 13 case was dismissed without a discharge, you must wait four years from the date of the dismissal. The best thing for you to do is to speak with a lender such as myself to see if you can get started on financing a new home. If you have any further questions or if you would like a loan, feel free to contact me.

Good Luck!
  • January 29
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Profile picture for bostonitalian2001
Thanks for the responses. 
  • January 28
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Profile picture for jkazakoff
A true alternative is to see if a relative will buy now and then you can re-fi when feasible. Otherwise, you are stuck with the waiting periods associated with each loan type.
  • January 27
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FHA will be your only option to buy this summer.  After the waiting period expires for conventional, you could refinance into that and possibly eliminate or reduce the PMI
  • January 27
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Profile picture for GMerino
Chapter 13 bankruptcy:  24 months must elapse from the discharge date or 48 months from the dismissal date.

Chapter 7 bankruptcy:  4-year waiting period.  From the discharge or dismissal date of the bankruptcy action. 

Just weigh out your options, you wait another year and home prices go up or you come in now and refinance in one year to get rid of your mortgage insurance.  FHA loans are good for this reason!
  • January 27
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Hi again!

Unfortunately, FHA may be your only choice right now. Conventional is a 2 year waiting period. If you have VA eligibility, that may be an option after 12 payments (depending on the overall strength of your credit profile). USDA is a 3 year wait for Chapter 13 and has other eligibility concerns that make it an unlikely choice.
  • January 27
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