Getting a Mortgage After Bankruptcy

There is life after bankruptcy.  You will be able to buy a car, a home and have credit again.  You will not need to pay cash for everything the rest of your life. Many people wait much longer than they should before filing bankruptcy because they fear filing bankruptcy will ruin their life forever.  They have read and heard that filing bankruptcy means they will never own anything again because they will never be approved for a loan or credit. This is simply not true.

A common bankruptcy myth that we hear often from our clients is that they will never be able to buy a home if they file bankruptcy.  Even though your bankruptcy filing will remain on your credit report for seven to ten years, you will probably be able to qualify for a mortgage within a few years.  The waiting period for applying for a new home loan after a bankruptcy filing largely depends on the chapter of bankruptcy you filed and the type of home loan you are seeking.

Fannie Mae Loans

If you are applying for a Fannie Mae conventional loan, you must wait four years from the date of discharge in a Chapter 7 case and two years from the date of discharge in a Chapter 13 case.

Federal Housing Administration (FHA) and Veterans Administration (VA) Loans

The guidelines for a loan through the Federal Housing Administration and the Veterans Administration are not as strict as they are for a Fannie Mae loan.  If you filed a Chapter 7 case, you only need to wait two years after the date of discharge and one year for a Chapter 13 case for a VA or FHA loan.

USDA Loans

USDA loans also have a different waiting period.  You must wait three years after the discharge date in a Chapter 7 case and one year after the discharge date in a Chapter 13 case to apply for a USDA loan.

Subprime Lenders

You may qualify for a non-government backed mortgage as soon as you have your bankruptcy discharge and your bankruptcy case is closed. Some lenders may have internal waiting periods specific to that company but there is no set waiting period to qualify for a subprime mortgage loan. However, these types of mortgage loans come at a very high price.  Interest rates for subprime loans can be as high as 15% with a minimum down payment of up to 30% in addition to the closing costs.

Ways You Can Help Yourself Qualify for a New Home Loan

Losing your home through bankruptcy is an emotional experience but you can own another home once you get back on your feet.  Rather than focusing on the fact that you lost your home, focus on steps that you can take now to rebuild your credit so that you will be in a good financial position to qualify for a loan when you are ready to purchase a new home.

Tips for rebuilding your credit after bankruptcy include:

It takes time and patience to improve your credit score after bankruptcy but it can be done.  Most debtors see a slight improvement in their credit score within a year or two after the bankruptcy filing. The important thing to remember is to make all payments on time, including utilities and other bills, and not to overextend yourself with credit as you work to rebuild your credit score.

If you are struggling with overwhelming debt, contact Weston Legal, PLLC to discuss your bankruptcy options.  You have options for dealing with your financial problems and we will help you find the solution that is best for you.

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