After a bankruptcy filing, you may wonder if you can buy a house. The answer is yes, but the process is more challenging, but not impossible. You have to rebuild credit, and you shouldn’t expect to get a home loan the day after a bankruptcy filing. The following information will help you learn more about buying a house post bankruptcy.
To be considered for a mortgage, you have to be discharged from the bankruptcy. A discharge means the court has completely released you from some types of debt and the creditors can no longer attempt collection. While a discharge doesn’t mean you are out of bankruptcy, the lenders will prefer to see it on your record. Your bankruptcy attorney should get a copy of the records.
Loans and Wait Periods
There are two common types of mortgages you can apply for after a bankruptcy, an FHA (Federal Housing Administration) and a VA (Veteran’s Administration) loan. FHA is a division of the Department of Housing that provides HUD loans for borrowers who have never owned a home with no credit history or they have less than perfect credit.
The FHA does not provide the loan, but secures the lender from default payments. Down payments are not as high as traditional home loans and may run as low as 3.5%. You may usually apply two years after the date of discharge from Chapter 7 bankruptcy or 12 months after a Chapter 13 bankruptcy, if you maintain a stellar credit history. The wait period could be less in situations where you had no choice but to file bankruptcy, such as a medical condition or a natural disaster. You have to prove you will be able to make payments.
A VA loan is designed for veterans through private lenders backed by the Department of Veteran Affairs. It requires a two-year wait period after Chapter 7 bankruptcy and 12 months following a Chapter 13 bankruptcy. You don’t have to make a down payment, but you still need to keep an unblemished credit report during the wait period.
Applying for a conventional loan is possible, but you have to wait longer. For a conventional loan, the wait period for a Chapter 7 bankruptcy could be 48 months for bankruptcy cases due to mismanagement and 24 months for circumstances out of your control. For Chapter 13 bankruptcy, expect to wait 24 months following discharge or one year for circumstances beyond your control.
Keep a check on your credit report during the wait period to ensure no false information hurts your chances for a loan. To get started filing bankruptcy, contact a bankruptcy attorney at Fair Free Legal Services today.