J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

Will you be looking for a mortgage soon, after being in a bankruptcy? It will likely be somewhat more difficult to qualify for a mortgage, starting this summer. Why? The Federal Housing Administration (FHA) announced policy changes on January 20th.

New borrowers will now be required to have a minimum FICO® score of 580 to qualify for FHA's 3.5% down payment program. And that is just the minimum. Most lenders now are going further to minimize their risk, and will require at least a 620 score for an FHA loan.

Also, new borrowers with less than a 580 FICO score will be required to put down at least 10% down on their home purchase. A lot of people will not be able to raise that kind of cash, or it will take them some time. Other things have also changed, but for many people the biggest problems will be the credit socre and the amount of money that will now be required as a down payment.

After my law office completes a bankruptcy, we perform a free "credit clean-up" for clients, that I'm told has the effect of raising the credit scores from 50-125 points. We ask the credit bureaus to "re-investigate" each of the "tradelines" or credit accounts, so that they accurately report the bankruptcy, and show the accounts as a -0- balance and the fact that they were "discharged in bankruptcy."

If this is not done, sometimes one or more unsecured credit accounts continue to show as delinquent, which makes it look like the bankrupt person acquired new credit after bankruptcy, and defaulted on it. So, now is the time to go for a mortgage. If you need to wait, you will need a better score, and some more cash, to qualify for an FHA mortgage.

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