So you had some tough times and had to file for bankruptcy to address the financial situation you faced. It happens. In fact it happens to more people than you would think. But does it mean you have to give up on your lifelong dream of someday owning your own home? Absolutely not! Getting a mortgage after you have filed for bankruptcy will depend upon the type of loan you want, the type of bankruptcy you filed, and how good your credit is at the time you want the loan. Let’s examine getting a mortgage after having filed for bankruptcy.
There are some things to consider after filing for bankruptcy and attempting a new mortgage. . .
- Waiting Periods – There are varying waiting periods according to the type of loan you hope to qualify for. After a chapter 7 bankruptcy you will need to wait at least 2 years from the time of the bankruptcy discharge before applying for an FHA mortgage, and 4 years for a conventional loan. This can be reduced to one year for extenuating circumstances with an FHA loan. With a chapter 13 bankruptcy, the waiting period is one year after discharge for FHA, or 24 months after discharge (or 48 months after dismissal) for conventional loans.(See Type of Loans below)
- Your Credit Report – Once your bankruptcy has been discharged you will want to organize and scrutinize your credit report. Have any errors on it corrected and start to rebuild your credit score. A secured credit card may help you get started on that. Keeping a clean credit report and paying your bills on time will go a long way in helping you get a better interest rate.
- Keep your Bankruptcy Paperwork – Keep all files that may help you when applying for a mortgage in the future. This will help with identifying that the waiting period is over as well as income documentation.
- The Type of Loan -There are several types of loans to consider when applying after a bankruptcy. FHA Loans and VA Loans require at least a two year waiting period after a chapter 7 and 12 months of satisfactory payments with a chapter 13 bankruptcy. USDA Loans require a three month waiting period after a chapter 7 or a year of making chapter 13 repayments. Conventional Loans have a longer waiting period. There is usually a four year waiting period after a chapter 7 and two year period after a chapter 13 discharge. Regardless of the type of loan you are seeking you must still pay the other qualifications that include income, creditworthiness, and other typical mortgage requirements.
he filing of a personal bankruptcy is not the end of your financial world. Due to the banking meltdown of 2008, it has once again become more difficult to obtain a mortgage for everyone, not just post-discharge debtors. To ease your path, I recommend, if possible, developing a relationship with a small local bank that can look at you as an individual and not a FICO score. You may have to work on it. You may not get their best rate, but your persistence will often result in a new mortgage for your new house.