Re-Establishing Credit After Bankruptcy To Qualify For Mortgage

How Long Does It Take In Re-Establishing Credit After Bankruptcy To Qualify For Mortgage?

Re-Establishing Credit After Bankruptcy To Qualify For Mortgage should be done the minute the Chapter 7 Bankruptcy discharge has been completed. Those who filed Chapter 13 Bankruptcy need to religiously make their monthly debt payments timely to their list of creditors. Believe it or not that most mortgage lenders WILL NOT accept any borrowers who had one late payment after a Chapter 7 Bankruptcy discharge, during a Chapter 13 Bankruptcy, after a foreclosure, after a deed in lieu of foreclosure, and after a short sale. They classify borrowers who had late payments after bankruptcy and foreclosure as a second offender and will steer away from them even though they get an automated approval via the Automated Underwriting System. Late Payments after bankruptcy is not a FHA, VA, Fannie Mae, Freddie Mac, or USDA Guidelines but many times the Automated Underwriting System will deny a borrower if the system recognizes late payments after bankruptcy and foreclosure. This includes short sale and deed in lieu of foreclosure.

Re-Establishing Credit With Debts Excluded From Bankruptcy

That depends on what someone does after filing for bankruptcy.

  • Petitioners that decide to exempt ┬ácar payment and that auto loan, mortgage loans, student loans or other debts is not discharged in the Chapter 7 Bankruptcy just filing Chapter 7 Bankruptcy can plummet credit scores more than 100 points.
  • However, timely payments on debts that is not discharged is made, credit scores will gradually go back up and is a form of re-establishing credit after bankruptcy to qualify for mortgage.
  • The easiest and fastest way of re-establishing credit after bankruptcy to qualify for mortgage is to obtain three to five secured credit cards with at least a $500 to $1,000 credit limit.
  • Secured credit cards under $500 credit limits will do minimum impact in improving credit scores.
  • There is a borrower that comes in mind where he got a 0% car loan after one year of filing Chapter 7 Bankruptcy and had credit scores of over 700 FICO because he was diligent in re-establishing credit right after the discharged date of his chapter 7.
  • There are three different credit reporting agencies and each of the three agencies have different models in calculating credit scores so one credit bureau may have a different credit score than the other two.

Not Obtaining Credit After Chapter 7 Bankruptcy

Many consumers who file Chapter 7 Bankruptcy do not want anything to do with credit and buy everything cash. They believe that credit got them in trouble and do not want to do nothing with credit. Unfortunately, by not obtaining new credit and having no credit reporting on their credit report, it ends up hurting them and their credit scores remains low. I highly recommend that consumers who got a bankruptcy discharge get a few secured credit cards even though they do not use them. I do realize that it cost an annual maintenance fee plus that fee is worth its weight in gold. Each secured credit card can boost a consumer’s credit scores by at least 20 to 50 points. After 3 secured credit cards the improvement of credit scores greatly reduces. Also, the consumer credit profiles will strengthen as it ages. I run into many borrowers who have filed bankruptcy years ago but still have credit scores of under 580 FICO and have never had a collection account or charge off account. They also have perfect payment history with not a single late payment. However, their credit remains low because of no re-established credit after Chapter 7 Bankruptcy.

Purchasing A Vehicle While In Chapter 13 Bankruptcy?

Filers of Chapter 13 Bankruptcy are eligible for an automobile purchase during their Chapter 13 Bankruptcy. You need to provide your Chapter 13 Bankruptcy Trustee the type of vehicle you are buying, the terms and interest rates on the proposed automobile loan, the purchase price, the down payment, and other factors involved with the car purchase so the Trustee can file a motion on behalf of the consumer that they are going to incur the auto debt with the U.S. Bankruptcy Courts. The courts will do a full review of the request and analyze the documents provided and then render a decision. Most of the time, the courts will approve an auto loan request unless it is a luxury or exotic automobile. Automobiles is a necessity for people to commute to work and do other domestic tasks such as shopping, driving children from and to school, etc. If you pay off your vehicle while in a Chapter 13 Bankruptcy, your automobile lender needs to send you the title to the vehicle to you and the vehicle is completely yours.

Purchasing A Vehicle While In Chapter 7 Bankruptcy

For consumers in a Chapter 7 Bankruptcy, it is best recommended that they wait until their Chapter 7 Bankruptcy has been discharged which is normally 90 days from the filing date and then purchase your new car and obtain a car loan. There are many car finance companies that will finance car buyers just out of a Chapter 7 Bankruptcy but your interest rates will be high. The best recommendation I can give you is try to re-establish your credit and wait for your credit to season for at least six months and then buy your car. If you need a car sooner, your auto lender may require you to have a co-signer.

Qualifying For Mortgage After Bankruptcy

Home buyers can qualify for mortgage after both Chapter 7 and Chapter 13 Bankruptcies.

Here is the qualification requirements to qualify for mortgage after Chapter 7 Bankruptcy:

  • 2 year waiting period after discharge date of Chapter 7
  • Re-established credit after Chapter 7
  • No late payments after Chapter 7
  • Minimum 580 FICO credit score
  • Re-Establishing Credit After Bankruptcy To Qualify For Mortgage is strongly recommended
  • The Gustan Cho Team at CrossCountry Mortgage has no overlays on FHA Loans

Here is the qualification requirements to qualify for mortgage after Chapter 13 Bankruptcy on FHA and VA Loans:

  • Borrowers can qualify for a FHA Loan one year into a Chapter 13 Bankruptcy with the approval of the Trustee
  • It will be a manual underwrite
  • All manual underwrites require verification of rent
  • Re-Establishing Credit After Bankruptcy To Qualify For Mortgage is highly recommended
  • There is no waiting period after a Chapter 13 Bankruptcy discharged date
  • No late payments during and after Chapter 13

Many borrowers are told that they do not qualify for a VA or FHA Loan after a Chapter 13 Bankruptcy unless they meet a one to two year waiting period. This is absolutely not the case and not true. Under Guidelines of the Veterans Administration and HUD Guidelines, there is no waiting period after a discharge date of a Chapter 13 Repayment Plan. Each lender can have overlays on waiting period after Chapter 13 Bankruptcy discharge date and do not have to honor VA or FHA Guidelines. The Gustan Cho Team at Nationwide Mortgage & Realty LLC does not have any overlays on FHA, VA, USDA, and Conventional Loans. Borrowers who are told that they do not qualify for a FHA or VA Loan after a Chapter 13 Bankruptcy, contact Gustan at 262-878-1965 or text Gustan Cho on his cell at 262-716-8151 for faster response. Our viewers can also email us at We are available 7 days a week, evenings, weekends, and holidays to take your mortgage inquires.

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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