Can I Buy a Home After Filing for Bankruptcy?

 Posted on July 13, 2022 in Bankruptcy

If your family has experienced financial difficulties, and you are struggling to pay the debts you owe while also managing ongoing household expenses, you may be considering bankruptcy. Filing for bankruptcy can provide some immediate relief, since it will create an automatic stay that will prevent creditors from contacting you, seeking repayment of debts, or taking actions such as pursuing judgments, repossessing property, or garnishing your wages. When you complete the bankruptcy process, certain types of debts will be discharged, and you will not be required to pay the amounts owed. While bankruptcy can provide many benefits, you may be concerned about how it will affect you in the future, especially if you are planning to buy a home. By understanding how bankruptcy will affect your ability to obtain a mortgage, you can make plans that will allow you to achieve your goals.

Waiting Periods for Different Types of Home Loans Following Bankruptcy

While bankruptcy will not disqualify you from purchasing a home in the future, it may make the process of receiving a home loan more complicated. Since bankruptcy will lower your credit score, you will be perceived as a higher risk by lenders, and receiving approval for a loan may be more difficult. However, by taking steps to improve your credit, you can demonstrate that you will be able to make ongoing mortgage payments, and saving up enough money for a down payment may help you to obtain a loan with a good interest rate. 

You will also need to be aware of the waiting periods that may apply before you can receive a mortgage following bankruptcy. These will differ depending on the type of loan you apply for and whether you filed for Chapter 7 or Chapter 13 bankruptcy. Waiting periods for different types of loans include:

• FHA loans - Some mortgages are available through programs provided by the Federal Housing Administration, which may allow you to purchase a home with a lower down payment. The waiting period for these loans is two years after receiving a discharge through Chapter 7 or one year after filing a Chapter 13 bankruptcy petition. You may be able to qualify for an FHA loan if you are still making payments toward a Chapter 13 repayment plan, although you will usually need to receive approval from the bankruptcy court and demonstrate that you have made at least 12 months of on-time payments.

• VA loans - These mortgages may be available to veterans or those who are currently serving in the U.S. military, and they usually do not require a down payment. The waiting periods for VA loans are the same as for FHA loans.

• USDA loans - If you live in a rural area and meet certain income requirements, you may qualify for a loan through programs operated by the U.S. Department of Agriculture. The waiting period for USDA loans is three years after a Chapter 7 discharge or one year after a Chapter 13 case was filed.

• Conventional mortgages - If you are looking to obtain a mortgage directly from a lender rather than through a government program, longer waiting periods will typically apply. The waiting period for these loans is generally four years after a Chapter 7 discharge or two years after the completion of a Chapter 13 repayment plan.

Contact Our New Braunfels Bankruptcy and Mortgage Loan Lawyer

If you want to know more about how bankruptcy will affect your ability to buy a home or other aspects of your family’s finances, the Law Offices of Chance M. McGhee can answer any questions you may have, and we will advise you of your best options for obtaining relief from your debts. Contact our Boerne bankruptcy and debt relief attorney at 210-342-3400 to arrange a complimentary consultation today.

Sources:

https://www.bankrate.com/mortgages/how-to-get-a-mortgage-after-bankruptcy/

https://www.rocketmortgage.com/learn/can-you-buy-a-house-after-bankruptcy

https://www.experian.com/blogs/ask-experian/can-i-get-a-mortgage-after-bankruptcy/