If My Student Loans Are in My Chapter 13, Can I Still Qualify for an FHA Loan?

Federal student loans and Federal Housing Administration (FHA) loans are both generated through the federal government. Whenever you apply for a loan with the government's backing, you will be subject to its rules and regulations, which can be stricter than those in the private market. Your financial history with the government, including how you have paid previous debts and taxes, will affect your ability to obtain a new loan with their backing.

Misconceptions

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.

Requirements

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.

Rationale

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.

Options

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.