Qualifying For Home Loan After Bankruptcy

This BLOG On Qualifying For Home Loan After Bankruptcy Was UPDATED On April 3, 2017

There are hundreds of people who file bankruptcy every day in the United States to bury the past and start a new life. Many folks consider bankruptcy as a last resort because they feel they are so buried in debt due to extended unemployment, medical reasons, failed businesses, or civil judgments.

Many of these bankruptcy filers believe that by filing bankruptcy, it will be many years before they can obtain a home loan after bankruptcy or refinance home loan after bankruptcy. In reality, they could become eligible for a home loan after bankruptcy with no waiting period with alternative financing such as non-qm loans offered by The Gustan Cho Team at Nationwide Mortgage & Realty LLC. The traditional mortgage loan programs such as FHA, VA, USDA, and Conventional Loans do have mandatory waiting periods to qualify for home loan after bankruptcy.

Waiting Period Requirements To Qualify For Home Loan After Bankruptcy

The following are the waiting period requirements to qualify for home loan after bankruptcy:

  • FHA requires a 2 year waiting period after a Chapter 7 Bankruptcy discharged date
  • Home buyers can qualify for a FHA and/or VA and/or USDA Loan one year in a Chapter 13 Bankruptcy repayment plan
  • Home buyers can qualify for a VA Loan two years after a Chapter 7 Bankruptcy discharged date
  • Home buyers can qualify for a USDA Loan two years after Chapter 7 Bankruptcy discharged date
  • Home buyers can qualify for a Conventional Loan four years after a Chapter 7 Bankruptcy discharged date
  • Home buyers can qualify for a Conventional Loan two years after a Chapter 13 Bankruptcy discharged date
  • There is no waiting period after bankruptcy, foreclosure, short sale, deed in lieu of foreclosure with non-qm loans also called alternative financing

Federal Housing Administration, also known as FHA, is one of the most popular loan program in the U.S. and borrowers who are one year into a Chapter 13 can qualify for a FHA Loan with the approval of the Trustee. There is no waiting period after a Chapter 13 Bankruptcy discharged date. Conventional mortgage guidelines from Fannie Mae and Freddie Mac, is stricter.  Waiting periods for conventional mortgages is normally a minimum of 4 years.

Power Of Secured Credit Cards

The most important point,according to home loan mortgage industry experts, is that consumers must re-establish their credit and show that they can manage it responsibly. They can do this by paying rent and utility bills on time, or perhaps by obtaining a secured credit card. Many who got a bankruptcy discharge do not want to deal with credit anymore because credit is what got them in trouble. This is not good for one’s credit profile. The best way to strengthen credit and re-establish credit is by getting three secured credit cards.

Letter Of Explanations To Mortgage Underwriters

If a bankruptcy filing was the result of a one-time occurrence, like the death of a spouse, divorce or illness, the waiting period to apply for a home loan mortgage may be reduced. Lenders will often want borrowers to write a hardship letter explaining their situation, backed by documentation like hospital bills or a court-approved divorce settlement.

Statistics show that 70 percent of personal bankruptcies are filed under Chapter 7, according to the American Bankruptcy Institute, a research organization. The data collected by this institute also noted that last year there were 1.362 million personal bankruptcy filings nationwide, which is a reduction from 1.53 million in 2010. At the end of the first quarter of this year there were 311,975 filings, which is 5 percent less than the first quarter of 2011.

Rebuilding Credit After Bankruptcy And Foreclosure

Rebuilding credit after a personal bankruptcy will take some work.  Methods of rebuilding your credit include getting three secured credit cards and not be late with any monthly payments.  Also, make sure you pay your utilities on time since many electric and gas companies now report your payment history to the credit bureaus.  Get a copy of your credit report and start disputing negative items and start a consistent credit repair program.

A personal bankruptcy filing will have a larger impact on a credit score than any other credit issue. Filing for bankruptcy protection will reduce a credit score by 200 points or more.  Foreclosures will impact a person scores by 100 to 150 points.

Your credit will get better with time.  It is like recovering from a major hard liquor hangover.  It heals with time.  If you start rebuilding your credit by reestablishing your credit with secured credit cards and disputing negative credit items on your credit report, you should be able to qualify for a home loan 2 years from the date of your bankruptcy discharge.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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