Is It Possible to Qualify for a Mortgage Not Long after Bankruptcy?

Filing for bankruptcy is always a decision you need to take seriously and with plenty of forethought. It’s a good idea to sit down with a bankruptcy attorney prior to filing in order to make sure you understand all bankruptcy entails so you know what to expect. Depending on the chapter you file, a bankruptcy will show up on your credit report for between seven and 10 years. This could affect a number of things in your life, including whether or not you can qualify for a mortgage.

The Reality of Qualifying for a Mortgage

Let’s dispense with one of the myths surrounding filing bankruptcy right away. Will it have an effect on when you can qualify for a mortgage? Yes. Will it mean you have to wait upwards of 10 years to get one? No. It’s possible, but definitely the exception and not the rule.

While handing over your home may have been part of your bankruptcy, getting a mortgage to buy another one can take less than a year. However, it will depend on two main factors: your credit and the loan program you decide on.

Your Credit

This should be fairly self-explanatory. Obviously, you need fairly good credit in order to qualify for a mortgage. With a bankruptcy on your record, you’ll really want the best possible credit you can get.

Yet, this doesn’t have to be so difficult. To be fair, if you used your bankruptcy to get rid of debt and reduce your expenses, you’ll be in much better shape to manage your credit rating this time around.

One great solution to build up your score is to apply for a secured credit card. Upon receiving it, lock in a loan from a credit union. Then just remain employed, so that you can easily pay the loan back (don’t actually spend it) and after about six months from your chapter 7 discharge, you’ll notice your credit score is in much better shape. At most, this process should take a year.

The Loan Program You Use

Next, we need to look at the loan program you decide on. Most of them will require a period of four years to pass from the date of your chapter 7 discharge before you can apply for one. If you filed a chapter 13, you usually have to have four straight years of payments before you can qualify for a loan.

With FHA loans, that waiting period is cut down to two years in both scenarios. The same goes for chapter 13s.

However, until September 30th of 2016, the FHA Back to Work Program allows borrowers to purchase a primary residence just a year after their chapter 7 discharge or with only one straight year of consistent chapter 13 plan payments. All you have to do is document the underlying reasons behind your economic hardship.

Until this program goes away, then, most bankruptcy filers can look forward to a new home within a year, especially if they use the aforementioned tactics for fortifying their credit score. Of course, if you have other skeletons in your personal finance closet, you may have to wait a bit longer.

That being said, it can’t be stressed enough that you should sit down with a bankruptcy lawyer before attempting to secure a mortgage or you could wind up in another bad situation. Call (703) 549-5000 today or complete a confidential contact form and we’ll be happy to provide you with a free consultation. Home ownership is always something to look forward to; you just need to make sure you go about it the right way.