Qualifying for a Mortgage after Bankruptcy

 Posted on December 04, 2014 in Chapter 7

Many people who are considering filing for bankruptcy hesitate because they fear their credit will be ruined for years to come and future plans, such as qualifying for a mortgage to purchase a home, will be almost impossible. The good news is that most people who file for bankruptcy are able to repair and build their credit back up within a few years and are able to fulfill that dream of owning their own home.

Most mortgage lenders have certain guidelines they follow when it comes to credit issues such as bankruptcy, foreclosure history and short sales. The following is a standardized list that lenders around the country follow and include conventional lender guidelines, Federal Housing Administration (FHA) guidelines and Veterans Administration (VA) guidelines.

For Chapter 7 bankruptcy filings, there is a four year waiting period from the date of discharge for qualifications of conventional mortgages; and two year waiting period from the date of discharge for a FHA or VA mortgage qualification.

A person who filed for Chapter 13 bankruptcy must wait two years from date of discharge to apply for a conventional mortgage. For FHA or VA mortgages, there is a one year waiting period from date of discharge, which includes on time payments for that year.

If you have had a home foreclosed on, then you cannot apply for a conventional mortgage for at least seven years. For an FHA mortgage, you will need to wait three years and for a VA mortgage, there is a two year waiting period before you can qualify.

If you chose a deed-in-lieu of foreclosure option, then there is a four year waiting period for conventional mortgages, three years for FHA and two years for VA mortgage qualification.

Short sales are another option homeowners choose to avoid foreclosure. A short sale is when a homeowner sells the home for less than what is owed on the mortgage, but the mortgage holder agrees to accept that amount in order to release any liens on the homeowner. If you have had a short sale, then with a conventional lender, you will need to wait two years if the loan-to-value (LTV) amount was 80 percent or four years if the LTV was 90 percent.

For FHA loans, as long as you had no late payments on your original mortgage, you will only need to wait one year from the date of sale to apply. If there were late payments, then there is a three year waiting period. For VHA, there is a two year waiting period, regardless of payment history.

If you are struggling with what feels like overwhelming debt, bankruptcy may be an option for your financial situation, consult an experienced San Antonio, Texas bankruptcy attorney.