Buying A House After Chapter 7 Bankruptcy
If you had a bankruptcy discharged a year ago or more, you might be starting to get your finances back in order. Maybe youre even thinking about buying a house.
The good news is that its possible to purchase a home following a Chapter 7 or Chapter 13 bankruptcy.
But theres a waiting period before you can take out a mortgage usually at least two years. And lenders will be looking closely at your credit score, credit reports, bankruptcy discharge details, and other factors to ensure you qualify.
Tread carefully after bankruptcy and take steps to improve your credit. With hard work and patience, youll eventually be able to get a home loan.
Can I Get A Mortgage After A Chapter 7 Bankruptcy
After filing for Chapter 7 bankruptcy, you will almost certainly be able to obtain a mortgage. The most important question is when you will be able to qualify for a mortgage, and this might vary depending on the sort of loan you are attempting to obtain. In most cases, you are eligible for a loan two years after receiving your discharge in a Chapter 7 case, unless otherwise stated.
Buying A House After Chapter 7 Bankruptcy Faq
How soon can I buy a house after Chapter 7 discharge?
Most home buyers have to wait at least 2 years after Chapter 7 discharge before they can get approved for a home loan. It may be possible to qualify sooner if you were forced into bankruptcy for reasons beyond your control, but early approval is rare.
What is the average credit score after Chapter 7?
The average credit score after a Chapter 7 bankruptcy is commonly in the low 400s to mid 500s, according to attorney Jeremiah Heck. To qualify for a home loan, you typically need a credit score of 580620 or higher.
Can you buy a house after Chapter 7 with a co-signer?
Yes, having a cosigner can improve your chances of getting a mortgage postbankruptcy. But remember that this can be a risky move for the cosigner. So you want to be sure you can make the monthly payments on time if you choose this option, recommends Graham. Also, you will still likely need to wait two to four years after a bankruptcy to apply for a mortgage loan, even with a cosigner.
Can I get a VA loan 1 year after Chapter 7?
Usually not. The minimum waiting period to obtain a VA loan after Chapter 7 bankruptcy is two years.
Can I get an FHA loan after Chapter 7?
Yes, provided you rebuild your credit and wait two years after your bankruptcy is approved by the courts. Avoiding new debt after your bankruptcy is discharged can also help your chances of qualifying for an FHA mortgage.
What credit score do I need for an FHA loan?
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How Does A Bankruptcy Affect My House
Real estate is a valuable asset that must be listed in the papers filed with the bankruptcy court. These documents or âschedulesâ give the bankruptcy court an overall picture of the filerâs financial situation. The mortgage on your home is especially important because it is a âsecuredâ debt. That is, your house acts as the âsecurityâ in case you cannot pay.
Before 2005, filers could keep their cars and other personal property as well as real property like their home as long as they kept current on their loans. In 2005, Congress eliminated this âride-throughâ option for personal property like cars, but not for real estate mortgages.
Fannie Freddie And Ginnie
Most conventional loans in the United States are owned by or insured by the government-sponsored enterprises Fannie Mae, Freddie Mac, or Ginnie Mae. These backers have similar loan eligibility requirements for borrowers who have filed bankruptcy cases. These are guidelines. Your mortgage lender or mortgage broker can help you with the specifics.
In addition to a waiting period, these organizations require that borrowers demonstrate they have re-established credit after the bankruptcy.
Chapter 7: The waiting period is 4 years, or 2 years with extenuating circumstances . An example of extenuating circumstances would be a layoff and extended unemployment, or medical issues.
Chapter 13: The waiting period is 2 years from discharge and 4 years from dismissal, or 2 years from dismissal with extenuating circumstances.
If you have more than one filing within the past 7 years, the waiting period is 5 years from the most recent discharge or 3 years with extenuating circumstances.
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Why Hire An Ohio Bankruptcy Lawyer
Although it will take some time and dedication to repair your credit, you can get a mortgage after a bankruptcy and/or foreclosure. An Ohio bankruptcy lawyer from Luftman, Heck & Associates can review your situation and let you know which type of mortgage loan is right for you. They can also guide you the process of rebuilding your credit and make sure you are being treated fairly by mortgage lenders.
Bankruptcy can allow you to eliminate overwhelming amounts of debt without compromising your future as a homeowner. For more information on how you can get a mortgage after bankruptcy and/or foreclosure, we encourage you to call us today at , or contact us online for a free consultation.
Can I Buy A House 1 Year After Chapter 7 Discharge
In most cases, theres at least a twoyear waiting period from your Chapter 7 discharge date until you can be approved for a home loan.
There are some limited circumstances in which you can obtain a loan after one year from the discharge, explains Andrea Puricelli, production resources engagement manager for Inlanta Mortgage.
But thats only if the bankruptcy was caused by extenuating circumstances beyond your control and youve since exhibited an ability to manage your financial affairs responsibly.
Such extenuating circumstances could apply if you were forced into bankruptcy due to a serious illness or major job loss or income reduction.
But in most cases, it takes more than a year to recover after declaring bankruptcy. So most home buyers will have to wait two years or more before applying anyway.
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Loans And Other Credit
After you have been discharged from bankruptcy, there is no legal waiting-time requirement that must be met in order to apply for most loans, such as personal loans or car loans. However, lenders will ask for your financial information, including whether you are employed, current debts and assets, in addition to obtaining credit reports which contain information about your credit history and bankruptcy. Therefore, before immediately applying for a loan after being discharged from bankruptcy, it is a good idea to spend some time on repairing your credit, which will increase your chances of getting a loan.
First Things First: The Bankruptcy Discharge
How long after bankruptcy can you buy a house? It varies. However, to even be considered for a mortgage loan request, the bankruptcy must first be discharged. A bankruptcy discharge is an order from a bankruptcy court that releases you from any liability on certain debts and prohibits creditors from attempting to collect on your discharged debts.
In simple terms, this means you dont have to pay the discharged debts, and your creditors cant try to make you pay. A discharge of your debts is just one step in the bankruptcy process. While it doesnt necessarily signal the end of your case, it is something lenders will want to see. The court often closes a bankruptcy case shortly after the discharge.
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Va Loans After Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often called “reorganization” bankruptcy and usually involves a repayment plan that can help you pay debts without selling property. If you satisfactorily completed the repayment plan, you can be eligible for a VA loan.
If you have made at least 12 months of payments toward this plan, you may be eligible if the trustee or judge overseeing your bankruptcy approves the application. Like Chapter 7 bankruptcy, you need to meet financial and income standards to be approved.
Different Types Of Bankruptcy And Getting A Personal Loan
The type of bankruptcy you end up with can make a difference in how soon youre able to get a personal loan. However, in most cases, you can apply a personal loan shortly after you finish bankruptcy proceedings. There are two types of bankruptcy that can impact your ability to borrow:
- Chapter 7: This is sometimes referred to as a fresh start. Your debts are wiped out, although the court will likely liquidate some of your assets to meet a portion of your obligations. A Chapter 7 bankruptcy can remain on your credit report for up to 10 years.
- Chapter 13: Instead of wiping out your debts, youre put on a court-ordered repayment plan, usually lasting between three and five years. With Chapter 13, the bankruptcy will drop off your credit report in seven years.
Either way, a bankruptcy can have a huge impact on your credit score, and the higher your score before the bankruptcy, the more significant the drop. The more time that elapses since your bankruptcy, though, the more your score improvesand the more likely you are to succeed in your loan application.
Following good habits after the bankruptcy can help you see improvement in your score, even with the bankruptcy still listed. You can apply for a personal loan anytime after the bankruptcy, but be prepared to have your application denied, or to pay a higher interest rate. The length of time it takes to get the loan may vary, too. As a result, it might make sense to wait a year or two before seeking a loan.
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What Type Of Home Loans Are Available After Bankruptcy
We also offer a wide variety of home loan programs specifically tailored to borrowers who are buying a house after bankruptcy. For that reason, we work with all kinds of financial situations: conventional mortgages, VA home loans, FHA loans, USDA loans, portfolio loans, jumbo loans, and more! After an in depth analysis, we will present the best available home loan programs, with the best terms, at lowest possible bottom line to you.
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Mortgage After Chapter 13 Discharge
Getting a mortgage after a chapter 13 discharge is a bit different in that you may be able to get approved with less than a 2 year waiting period. With a chapter 13 bankruptcy, you are committing to paying back your debt and will likely be on a payment plan. It is important that you stick to the plan and make your payments on time.
We have a handful of FHA lenders in our network who will finance your home with an FHA loan after you have made at least 12 on time Chapter 13 bankruptcy payments. This can be done well before the loan has been discharged. If you would like to get approved for an FHA loan without waiting until 1 year after your discharge, then we can help.
There are also nonprime lenderswho are willing to finance your home immediately after a chapter 13 bankruptcy discharge. They will look at your credit scores to determine what the down payment and interest rate will be.
You may also have the ability to get an FHA loan with a chapter 13 bankruptcy without waiting the full two years.
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Is A Conventional Loan Right For You
A conventional loan can come from three organizations called:
- Ginnie Mae: Government-owned loans such as FHA loans, VA loans, and USDA loans
- Fannie Mae or Freddie Mac: Private loans or government-insured loans
You cannot get a lender to approve Fannie Mae or Freddie Mac loans if:
- You filed Chapter 7 bankruptcy in the last four years
- You filed Chapter 13 bankruptcy and got a discharge within the last two years
- Your Chapter 13 bankruptcy was dismissed less than four years ago
Sometimes, the waiting period can be shortened for major life changes, called extenuating circumstances. Things like a divorce, losing your job, or illness or accidents that result in large medical debt are beyond your control. They can reduce your waiting period after these circumstances.
Some banks or private loan officers can choose to underwrite a loan with less strict rules and waiting times, or more strict rules. That always depends on the bank’s practices.
The Bankruptcy Court And The Reaffirmation Of Mortgages
Judges ultimately decide whether to approve reaffirmation agreements on real property. Their stance on reaffirmation of mortgages, in turn, depends on the state. Bankruptcy courts across the country are split on the issue. In some states, reaffirming a mortgage is routine and judges gladly approve the agreements. In others, judges can dress down bankruptcy lawyers for even floating the idea. New Jersey and New York are examples. In such states, no attorney would prepare much less file a reaffirmation agreement destined to be rejected by the court.
If your mortgage company is telling you that all borrowers agree to mortgage reaffirmations, now you know this is false. If youâre worried about what to do, consult a local bankruptcy lawyer who practices in that area. A law firm can tell right away whether mortgage reaffirmation in your state is wise.
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What You Need For Preapproval
With or without a history of bankruptcy, youll need good enough credit to get preapproved. Heres what that means for each loan type.
- Conventional Fannie/Freddie mortgage: 620
- FHA loan: 500 with at least 10% down 580 with at least 3.5% down
- VA or USDA loan: No minimum, but you are more likely to get approved with a score of at least 640
Gather these documents before you apply so lenders will be able to quickly make a preapproval decision on your loan.
- Your Social Security card
What Are Conventional Loans
Conventional loans are those originated by banks, credit unions and online lending sources.
They are not guaranteed by the government, but they typically have the best interest rates and terms, which means lower monthly payments. The most common type of conventional mortgage is 30-year fixed-rate, which accounted for 79% of mortgages between 2019 and 2021, according to ICE Mortgage Technology.
Conventional loans require a credit score of 620 or higher. The higher the score, the better the terms. One of the biggest advantages is that a down payment of 20% means you dont have to pay private mortgage insurance, which can add thousands to a mortgage.
Even if you dont put down 20% at the closing, once the equity in the house reaches 20%, the PMI is dropped. With an FHA loan, it never drops, and you have to pay a one-time up-front premium of 1.75% of the base amount of the loan.
The waiting period for a conventional loan after bankruptcy is:
- Chapter 7 Four years after discharge date
- Chapter 13 Two years. If the case is dismissed, which happens when the person filing for bankruptcy doesnt follow the plan, its four years.
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Legal Help After Chapter 7 Bankruptcy
The unique details of your case will determine which type of post-bankruptcy mortgage is right for you. Although it is possible to qualify for a mortgage loan after Chapter 7 bankruptcy, you will likely face some significant roadblocks as you pursue this dream. That is where an experienced Ohio bankruptcy lawyer from Luftman, Heck & Associates comes in.
How To Increase Your Chance Of Approval During Your Bankruptcy Waiting Period
A waiting period after bankruptcy is to your benefit as this time can be utilized to rebuild credit. Bankruptcy or not, your credit score still impacts the amount of interest youll pay on a mortgage loan, so its wise to work on obtaining the healthiest score possible. Theres good news: the financial best practices for building/raising a are the same whether bankruptcy is in a borrowers background or not.
- Making on-time payments for all debts
- Working to lower any outstanding debt obligations and lower your debt-to-income ratio as much as possible
- Keep credit utilization rate as low as possible below 30% if you can
- Checking your credit report for errors
- Keeping requests for new lines of credit at a minimum
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Va Loan After A Chapter 7 Bankruptcy
Below are some of the basic requirements to get a VA loan after a chapter 7 bankruptcy discharge:
- The mandatory waiting period to get a VA loan after a chapter 7 bankruptcy is 2 years.
- VA loans do not have a minimum credit score requirement. It will depend on the lenders minimum credit score requirement, which often is around 620.
- VA loans to not require a down payment.
- In order to be eligible for a VA loan, you must be a veteran, or active duty military.
Would you like to see if you qualify for a VA loan? We can match you with a mortgage lender that offers VA loans in your location.
Conforming Mortgage Loan Requirements
Fannie Mae and Freddie Mac the national rulemakers for conforming loans allow Chapter 7 filers to apply for a Fannie Mae or Freddie Mac mortgage after bankruptcy. But the wait is four years after their discharge or dismissal .
The waiting period for Chapter 13 bankruptcies is two years. But this is two years after discharge, not filing. Since Chapter 13 bankruptcies typically take five years to discharge, your total waiting period under a conforming mortgage program would be seven years from the filing date.
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