- Many people think the government issues loans to individuals who do not qualify for private loans. In reality, the government has a strict set of rules and regulations on borrowing. While many federal programs are aimed at low income borrowers, most programs require a positive credit history. This is true of both federal student loans and FHA loans.
- To obtain any federal loan or federally backed loan, you must meet requirements. These requirements include a positive loan payment history, a lack of bankruptcy or foreclosure in the past, and good standing on all of your current debts. If you have student loans in bankruptcy, you will not qualify for an FHA loan.
- When the FHA issues a loan guarantee, it promises to repay the primary lender if the borrower defaults. This means the FHA is taking a large risk, and it must do so wisely. If the FHA has reason to believe you will default, it will not issue the loan. If you are paying off a Chapter 13 bankruptcy and are current on those payments, you may be considered for an FHA loan. However, if that bankruptcy includes federal student loan debts, your chances of approval are very low.
- One option you have is to pay off your Chapter 13 payments prior to applying for an FHA loan. If you do this, the FHA will consider your loan application in the future. However, if you need a loan in the near future and cannot wait to pay off your bankruptcy, you may have to seek a private loan without an FHA guarantee. In this case, your bankruptcy may still preclude you from qualification.
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