conflicting information on buying a house in chapter 13.

[impressivesort89]

So im hoping I can get some info as im getting really confused on when im eligible to buy a new house. I am almost 2 years into my chap 13 plan (not 100% repayment). I never had an issue with employment and have been state gov employed since 2003, with very steady pay raises over the years. Which is why we had to file 13. We had to file as the result of a business that unfortunately failed and we had PG'd a lot of the debt.  Anyway, we did surrender a house as part of the bk13. The house was an FHA loan and at the time for some reason it was actually cheaper to go FHA over conventional (lower interest rate). I qualified for both and kick my self for not going conventional. 

My lawyer told me when we filed and chose to surrender over trying to sell the property that I would eligible for an FHA loan after just 1 year of on time payments, and that I just had to find a lender that would "manually underwrite" the loan.  But the lenders I have spoken to say that becuase of the the FHA surrendered house its really 3 years (So I still have another year to wait) before I am eligible.

I brought this up with the lawyer and he is telling me the lenders are incorrect and the guideline they are reffering to is for an FHA surrender on its own that isnt part of a bankrupcy, and that mortgages discharged as part of the bankrupcy follow BK guidelines. Looking online I cant get a good grasp on whos right here and if its lender overlay or actual guidelines.

My current credit scores are in the mid 6s (622, 627 and 644). I have 20-30% down via a trust fund (the stipulations of the trust are to be used only for medical or primary housing so it was shielded from bk). I have a w2 salary of about 228k per year as mentioned earlier been employed at the same employer since 03. Only debts are my car 700 a month (reaffirmed paid outside of the plan), the chapter 13 payment of 3k per month, and an NFCU secured credit card with a 500 limit. My current rent is 3995 per month and mortgage estimates with the down payment from the trust are coming in about 3600-3800.

Lawyer is not worried about trustee approval as the housing costs would be going down, my lease is expiring in May of this year and landlord is not renewing (no reason other than they are ready to move back into house). I have been on time every month with rent, utilites, trustee payment, car, and the one secured credit card I have through NFCU. Plus have 3 months emergency fund in savings. So other than this major issue with the old house being surrendered, we feel more than ready to buy.  But we are worried at this point we will need to find a new place to lease. 

[Lurker22]

You’re running into a very common FHA misconception, and this is one of those cases where bankruptcy law and FHA lending rules don’t line up.

Your lenders are correct under current FHA guidelines.

Here’s the key point that’s causing the confusion:

FHA treats a surrendered home in Chapter 13 as a foreclosure/Deed-in-Lieu event

Even if:

• The mortgage was included in the Chapter 13

• You surrendered the property

• The debt was discharged or is being discharged through the plan

👉 FHA still requires a 3-year waiting period, and the clock does NOT start at Chapter 13 filing.

It starts from the date the foreclosure or deed-in-lieu is completed, whichever is later.

Why your attorney is partially right — but not for FHA

Your attorney is correct that FHA allows financing during an active Chapter 13 after 12 months of on-time plan payments ONLY IF:

• There was no foreclosure, short sale, or deed-in-lieu

• AND the prior mortgage was paid off, sold, or otherwise resolved without foreclosure

That rule does not override FHA’s separate housing event waiting period when a property is surrendered.

FHA explicitly separates:

• Bankruptcy seasoning

• Foreclosure / housing event seasoning

They run independently, not one instead of the other.

[impressivesort89]

Thank you so much for this info. It is very helpful. While disapointing, it looks like we have another year or so to wait. I kind of thought that was the answer. Just glad to know for sure. Thanks again!