it’s a little known fact amongst Homebuyers, Renters, Realtors and even Loan Officers that both FHA and VA allow a Borrower to purchase a home after they’ve made 12 timely payments on a Chapter 13 BK.
Wait! What? Yes you read that right.
Why is this important? It’s important because while grappling with many unpaid collections, charge off’s and judgements, a Borrower’s credit score remains low and unable to revive. This keeps them from FHA financing.
Bringing all that unpaid debt, all the dirty laundry so to speak, under the governance of the Bankruptcy Trustee forces the credit bureaus to begin reporting each of those negative accounts as “INCLUDED IN BANKRUPTCY”.
The magic is this: When a trade/account is reported in this way, the FICO (Credit) Scoring model treats the accounts as “non-rated”.
Their negative effect is diminished!
Now a smart homebuyer would couple this with obtaining maybe 2 or 3 **secured** credit cards which are virtually guaranteed, pay on them for 12 months alongside the Bankruptcy Trustee payments and . . . voila! After 12 months of filing Chapter 13 the Borrower has a better score *AND* some re-established credit.
It’s important if using this maneuver to not leave any unpaid collection/charge off outside the BK filing.
For more details on purchasing a home while in Chapter 13 Bankruptcy, contact us at 877-332-9703 or through the links on this blog site.
Tags: Chapter 13 Bankruptcy FHA, derogatory credit event, FHA 203b, FHA home loan, mortgage after bankruptcy, seasoning since Bankruptcy, seasoning since short sale, since derogatory credit, VA bad credit, VA credit