Many people believe that getting a home loan after a bankruptcy is impossible. This is simply not true. It is possible to get a mortgage after a bankruptcy. There are just specific rules and regulations you have to follow to qualify. There are several different loan programs that have their own unique requirements for getting a loan after a bankruptcy. These requirements usually include some kind of a waiting period as well as certain credit requirements. Below is a detailed breakdown of what is required for the most common loan programs.
Bankruptcy (Chapter 7 or Chapter 13)
In order to qualify for a FHA loan after a Chapter 7 or a Chapter 13 bankruptcy, a borrower must wait 2 years from the date of discharge on the bankruptcy.
The borrower must also have:
- Re-established good credit; or
- Chosen not to incur new debt obligations
In some cases the waiting period for getting an FHA loan after bankruptcy can be 12 months. This is possible if the borrower can show the bankruptcy was result of “extenuating circumstances beyond their control.”
Bankruptcy (Chapter 13)
If the borrower has been making timely payments on their bankruptcy plan for at least 12 months and the borrower receives written permission from the bankruptcy court to enter into a mortgage transaction, then a loan can be done for a borrower who is actually in repayment on a Chapter 13 bankruptcy.
Bankruptcy (Chapter 7 or Chapter 11)
In order to qualify for a conventional loan after a Chapter 7 or a Chapter 11 bankruptcy, a borrower must wait 4 years from the discharge or dismissal date on the bankruptcy.
In some cases, a 2 year waiting period is permitted if extenuating circumstances can be documented.
Bankruptcy (Chapter 13)
A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows:
- 2 years from the discharge date, or
- 4 years from the dismissal date.
The shorter waiting period based on the discharge date recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 13 plan and subsequent discharge. A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be held to a four-year waiting period.
In some cases, a 2 year waiting period is permitted after a Chapter 13 dismissal if extenuating circumstances can be documented. There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge.
Multiple Bankruptcy Filings
For a borrower with more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date.
Note: Two or more borrowers with individual bankruptcies are not cumulative, and do not constitute multiple bankruptcies. For example, if the borrower has one bankruptcy and the co-borrower has one bankruptcy this is not considered a multiple bankruptcy.
In some cases, a 3 year waiting period is permitted if extenuating circumstances can be documented, and is measured from the most recent bankruptcy discharge or dismissal date. The most recent bankruptcy filing must have been the result of extenuating circumstances.
Going through a bankruptcy is something that we hope no one ever has to go through. It can be an extremely difficult thing to overcome. It is important, however, to know that there is still hope for a better life after bankruptcy, especially when it comes to being able to get into a new home. There are certain waiting periods and regulations that are required before someone can qualify, but they are not impossible hurdles. If you, or someone you know, has been through a bankruptcy and are wondering what steps you need to take to qualify for a home loan, please contact one of our mortgage professionals today. We would be happy to take a look at your situation and walk you through any steps that you need to take to get qualified.