Part of the FHA loans in Arizona guide, where every rule on this page is cited and dated.
A credit event is not a permanent disqualification, and FHA is generally the most accommodating path back. Two things decide your timeline: how long it has been, and whether an exception applies to you.
Most borrowers only learn about the first. The exceptions are where the real opportunity is, and they require someone willing to document them.
Bankruptcy
The distinction that matters: Chapter 7 and Chapter 13 are treated differently, and Chapter 13 is the one people assume disqualifies them when it frequently does not. A borrower still in an active Chapter 13 plan can in some circumstances be eligible, with documentation of the payment history and, generally, court or trustee permission to take on the new debt.
That is a real path and it is routinely missed, because it requires an originator to request a trustee letter and wait for it rather than quote a waiting period and move on.
What to gather:
- The discharge paperwork, or if still in plan, the plan and the payment history.
- Evidence of payments made on time throughout the plan.
- Trustee or court documentation regarding the new mortgage, where required.
- A written explanation of what caused the bankruptcy, which matters more than people expect. An underwriter is assessing whether the cause was a one-time event outside your control or a pattern. Those read very differently.
Foreclosure, short sale and deed in lieu
A few things worth knowing here.
The clock usually starts at the completion date, not the filing date. For a foreclosure that is generally when title actually transferred, which can be well after the process began. People routinely think they are further from eligibility than they are, or closer, because they are counting from the wrong date. Get the recorded date.
A short sale and a foreclosure are not necessarily treated the same, and neither is a deed in lieu.
If the property was in Arizona, get the recorded documents. Arizona foreclosures are commonly handled as trustee sales, and the recorded trustee's deed establishes the date. Do not rely on memory or on a credit report entry, which is frequently wrong about dates.
A mortgage included in a bankruptcy is its own question. Where a property was surrendered in a bankruptcy and later foreclosed, which clock governs is a real and consequential question with a specific answer. This is exactly the kind of detail that gets handled wrong, and getting it wrong in your favor is not a win, because underwriting will catch it.
The exceptions, which are the point of this page
The handbook contemplates circumstances where a shorter timeline applies, generally tied to a credit event caused by an extenuating circumstance rather than by financial mismanagement.
The bar is real. A documented, one-time event outside your control that caused a significant loss of income or significant unexpected expense is a different situation from having taken on more debt than you could carry. The former can qualify for different treatment; the latter cannot, no matter how sympathetic.
What documenting one actually requires:
- Independent third-party evidence of the event, not just your account of it. Medical records, a death certificate, termination documentation, court records.
- Evidence of the financial impact and its timing, connecting the event to the credit event.
- Evidence your credit was satisfactory before the event.
- Evidence of re-established credit since, with a clean recent history.
- A written explanation that is specific and consistent with the documents.
Also worth knowing: some programs require documented housing counseling in connection with certain exception scenarios. Ask whether yours does, because it takes calendar time.
Divorce is a nuanced case. It is frequently the proximate cause of a credit event and it is not automatically treated as an extenuating circumstance on its own. How it is viewed depends on the specific facts and documentation. If this is your situation, see Divorce and the Mortgage in Arizona and raise it on the first call.
What to do while you wait
If you are inside the waiting period, the time is not dead. It is the most valuable window you have.
Re-establish credit deliberately. Underwriting wants to see clean recent history. A thin file with nothing reporting is its own problem.
Pay everything on time, without exception. A single late payment during this period is genuinely damaging.
Work the report itself. Items that are inaccurate or that a furnisher cannot verify can be challenged through the bureau dispute process, which takes weeks and sometimes two rounds. Do this now, not when you are in contract. See Fix the Credit First.
Build reserves. On a file with a past credit event you may well end up manually underwritten, where reserves are frequently a compensating factor. Cash in the bank after closing carries real weight. See What a Manual Underwrite Is.
Do not open new accounts in the months before you apply.
Get the documents now, while you can still find them. Discharge paperwork, recorded deeds, medical or employment records. People spend weeks hunting for a 2019 document during a thirty day escrow. Build the file in advance.
Two other things that stop these files
Unpaid federal debt. This catches people with a past event who assume the timeline is their only obstacle.
See Collections, Judgments and Federal Debt.
Expect a manual underwrite. A past credit event frequently routes a file to manual underwriting, which means tighter ratio limits and compensating factors. Plan for that framework rather than being surprised by it.
The honest summary
FHA is generally your shortest path back after a credit event, the clock usually runs from the completion date rather than the filing date, and exceptions exist for documented one-time circumstances outside your control.
But exceptions require an originator who will chase a trustee letter, read a recorded trustee's deed, and assemble third-party documentation rather than quote you a waiting period off a chart. Ask whichever lender you talk to whether an exception might apply to your facts. The answer tells you a lot about who you are working with.
Why bring this file to us
- We quote the handbook with the section and the date, not from memory. Every guideline on this site carries its citation and when it was last verified, and says so when it is getting old.
- We tell you the overlay, not just the rule. The published floor and what investors actually do are two different numbers, and only one of them decides your file.
- Broker model. When one investor's overlay is the obstacle, we move the file rather than tell you no.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending, NMLS #173141, lending in Arizona since 1999 and a 2025 Presidents Club Winner at CMG Home Loans. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
Call before you shop, not after you are in contract. Most of what goes wrong in an FHA file was decidable in week one.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. FHA is a mortgage insurance program administered by the Department of Housing and Urban Development; loans are made by approved lenders, not by HUD or FHA. Guideline requirements are set out in HUD Handbook 4000.1 and change over time, and individual investors frequently impose requirements stricter than the published minimums. Nothing here is a substitute for the current handbook or for an underwriting decision on your specific file. Rates, terms and program guidelines change and depend on credit approval, property appraisal and other qualifying factors. Not all applicants will qualify. This is not legal or tax advice.
Looking at a specific home? Send me the address and I will run the numbers: rickykhamis.com/analyze
