If you file for bankruptcy, you will not immediately qualify for a mortgage afterwards. Bankruptcy will not necessarily hurt your credit score however it’s likely you will need time to get back on your feet financially. Because bankruptcy provides you with a fresh financial start it will not take forever to qualify for a mortgage. Your options depend on what type of mortgage you are seeking, as well as what type of bankruptcy you filed.
There are a variety of mortgages that are available to you after filing for bankruptcy. One to consider is an FHA loan. An FHA loan is insured by the federal government, and allows buyers to put down a much smaller down payment. The credit score requirements are also looser – some people with a credit score as low as 580 will qualify.
If you filed a Chapter 7 bankruptcy, you will usually need to wait two years from the date of discharge of the bankruptcy to qualify. However, if you can prove the bankruptcy was beyond your control, you may only have to wait one year. On the other hand, if you filed a Chapter 13 bankruptcy, and you are making payments to your creditors, you could qualify for an FHA loan if you have made a minimum of a year’s worth of payments to creditors, and if the court approves your request to purchase a house.
If you are a veteran, you may qualify for a VA loan. A VA loan does not require a down payment and there is no minimum credit score requirement. If you file for bankruptcy, and you do not run into any credit problems post-bankruptcy, you can normally apply for the loan two years after your bankruptcy is discharged. One thing to note is that individual lenders participate in the VA loan program, and they may require a certain credit score.
If you are interested in purchasing a home in a rural area, you may consider a USDA loan. USDA loans have options with no down payments and low interest rates. If you filed a Chapter 7 bankruptcy, you can qualify for a USDA loan three years after the discharge, unless you can prove the bankruptcy was beyond your control, in which case you may qualify a year after the discharge. If you filed a Chapter 13 bankruptcy, you can apply for a USDA loan after a year of plan payments.
Finally, you may consider a conventional loan. Conventional loans are not insured by the federal government. Lenders usually have higher interest rates and require better credit scores in order to qualify. However, if you filed for a Chapter 7 bankruptcy, you will be eligible to apply for a conventional loan 48 months after the discharge, unless the bankruptcy was beyond your control, in which case you can apply 24 months after the discharge. On the other hand, if you filed a Chapter 13 bankruptcy, you will need to wait 24 months after discharge. If you have filed more than one bankruptcy within the previous seven years, you will have to wait five years.
Obtaining a mortgage after a bankruptcy is not always easy, but fortunately the standards have loosened somewhat in recent years. If you are considering filing for bankruptcy but you aren’t sure about all of your options, you should speak with a bankruptcy attorney. Call the Atlanta bankruptcy attorneys at Holston & Huntley at (404) 620-3337. Our attorneys are experienced and can help find the right solution for you! Call us today to schedule a FREE consultation.