This can take time. Pre-qualification can help save you from much frustration when you find the home of your dreams. It guarantees loans made by commercial banks. Often the banks will impose qualifications or minimum requirements that are more stringent than what FHA or other government agencies have in place. Many banks require that you wait three years before applying. The time requirements for a VA loan are similar to those required by FHA, but with more hoops to jump through before approval.
During that two years, you have to take steps toward re-establishing good credit. You will also be asked to provide an explanation for the Chapter 7 bankruptcy, and to show that your income is stable. 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 that they have re-established credit after the bankruptcy. An example of extenuating circumstances would be a layoff and extended unemployment, or medical issues. 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.
With a Chapter 7 bankruptcy , you'll have to sell your possessions to pay off credit card debt, medical bills, personal loans and other types of unsecured debts. Even though this type of bankruptcy will stay on your credit report for up to 10 years, you may still be able to get a mortgage.
You'll need to wait until enough time has passed since your bankruptcy was discharged and make sure you have a substantial down payment and that you've worked on rebuilding your credit history. More on lender-required waiting periods below. Chapter 11 bankruptcy is typically used by businesses, but can be filed by individuals as well if they make too much money to qualify for a Chapter 7 filing or have more debt than is allowed in a Chapter 13 bankruptcy.
Even for those who do qualify, Chapter 11 is complex and expensive, which is why consumers typically file Chapter 7 or Chapter As long as you've waited long enough after your Chapter 11 bankruptcy has been discharged, you should be eligible to get a mortgage. Chapter 13 bankruptcy can give you the chance to repay all or some of your debts during a repayment period that typically lasts three to five years.
The remainder of your debt will be discharged when your repayment period comes to an end. This type of bankruptcy can stay on your credit report for up to seven years. To get a mortgage after Chapter 13 bankruptcy, you'll need to get permission from your bankruptcy trustee, the person who oversees your repayment plan to creditors. Types of Mortgage Loans to Consider After Bankruptcy If you want to try to get a mortgage after bankruptcy, you can research a number of different types of loans.
Each mortgage loan has its own unique requirements for bankruptcy filers. Federal Housing Administration FHA loans are managed by the federal government and may allow you to buy a house with a down payment that's as little as 3.
The downfall of FHA loans, however, is that you'll have to pay for mortgage insurance, which will result in higher monthly payments. To get a mortgage after bankruptcy using an FHA loan, you'll have to adhere to these waiting periods:. Department of Agriculture USDA loans are designed for rural borrowers who meet certain income requirements. It may be a good option if you'd like to buy a house in a rural area, have a low or modest income, and aren't eligible for a conventional loan.
If you go this route, you may not have to put any money down and you may be able to secure a low interest rate. Keep these waiting requirements in mind if you're interested in getting a USDA mortgage after bankruptcy:. If you're a veteran or currently serving in the military, you may be eligible for a Department of Veterans Affairs VA loan.
A VA loan doesn't require a down payment or charge private mortgage insurance and can give you the chance to lock in a low interest rate. If you pursue a VA loan, however, you'll have to pay a funding fee, which will be a percentage of your home price. Here are the waiting requirements you should be aware of if you'd like to get a VA loan after bankruptcy:. Since conventional loans are not guaranteed or insured by government agencies, you can expect stricter requirements, such as having a good credit score, if you apply for one.
With all of these types of loans, if your goal is to get approved for a mortgage after bankruptcy, it's a good idea to focus on rebuilding your credit before applying. By doing so, you may increase your chances of getting approved and landing more favorable terms.
Here are some tips to help you rebuild your credit:. Taking out a mortgage is a large financial undertaking. If you'd like to get a mortgage after bankruptcy, take some time to rebuild your credit and improve your finances first. Once you're confident you can comfortably afford mortgage payments, taxes, and the various other costs associated with owning a home, you can begin your journey to homeownership.
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