Bankruptcies are often necessary but they will of course stick with you on your credit report for years. Chapter 13 bankruptcies will stay on your record for 7 years after discharge, and chapter 7 bankruptcies will stay on your record for 10 years after discharge.
How Long After Bankruptcy Can I Buy a House?
There are a few government sponsored programs which make the process of getting a mortgage after bankruptcy easier, but they also come attached to waiting or “seasoning” periods which vary depending on the program.
- FHA Loans - 2 year required seasoning period
- VA Loan - 2 year required seasoning period
- USDA/RD Loan - 3 year seasoning period
- Conventional Loan - 4 year seasoning period
Some larger banks and financial institutions also have “guideline overlays” in place. Guideline overlays add more time to the waiting periods required after a bankruptcy. Luckily for those wishing to purchase a mortgage, there are many direct lenders which do not add overlays. At Homesite Mortgage, we don’t add any overlays aside from those government rules mentioned in this article.
Qualifying for an FHA Loan After Bankruptcy
After a Chapter 13 or Chapter 7 bankruptcy, you’ll need to wait two years after the discharge date to qualify for an FHA Loan. FHA Loans are government-insured loans (by the Federal Housing Administration), so they only require only a 3.5% down payment. FHA Loan eligibility requirements are very forgiving for low credit scores, so they are attainable after bankruptcy.
If you have filed for Chapter 13 bankruptcy, you may be able to purchase an FHA mortgage during your repayment period. If you are able to provide 12 months of recorded on-time payments towards your debts, and you will are able to obtain the court’s permission, you can actually qualify for a FHA mortgage in an open chapter 13 bankruptcy. You can use a FHA loan to purchase a new home or refinance an existing mortgage. Speak with a FHA loan expert to find out if you qualify today!
Qualifying for a VA Loan After Bankruptcy
Once you have a discharged Chapter 13 or Chapter 7 you’ll only need to wait two years to qualify for a VA mortgage. VA Loans are offered to military Veterans and spouses or widow(er)s of serviceman and women. They are guaranteed by the U.S. Department of Veteran Affairs. VA Loans require no down payment and have lenient requirements for credit scores, so they are also very accessible after a bankruptcy. They can be used to purchase a new home or refinance an existing mortgage - even if it’s not a VA loan. Speak with a VA loan expert for all of the advantages of a VA home loan.
Qualifying for a USDA/RD Loan After Bankruptcy
USDA Home Loans were created in order build up the economic stability and quality of life in rural areas throughout the United States. To support this program, the U.S. Government requires only a three year waiting period between bankruptcy discharge and USDA loan application. If you are planning to live in a rural area, a USDA loan is a completely viable solution to find a mortgage after bankruptcy.
If you can prove that your bankruptcy was a result of an event out of your control, you may be able to receive a USDA loan as little as 12 months after your discharge date.
The United States Department of Agriculture insures Rural Development (RD) loans. These loans have both geographic limitations as well as limitations on household income. Speak with a USDA loan expert for further details on the limitations and advantages of RD home loans.
Qualifying for a Conventional Loan After Bankruptcy
Conventional mortgages aren’t secured by the government, but still adhere to the rules for Fannie Mae and Freddie Mac. Conventional loans require a waiting period of 4 years after bankruptcy.
Like FHA and USDA Loans, conventional loans may permit a shortened waiting period in extenuating circumstances. For example, if the event causing bankruptcy was medical related, then the waiting period may be shortened to 2 years.
After a bankruptcy, it is smart to save money, as you might end up having to pay a down payment on a conventional loan. Because a conventional loan isn’t secured by a government agency, a bank will require you to pay mortgage insurance. Mortgage insurance is usually required up until you have 20% equity in the home. If you can pay that initial 20% as a down payment, you won’t be required to pay mortgage insurance. Alternatively, you may only be required to pay 5% down.
Did we miss anything?
If you’re still unsure about any of the terms, waiting periods, exceptions, or rates that come along with these loans, the most convenient way to learn more is to speak with a FHA, VA, USDA or Conventional loan expert.