Buying a house after Chapter 7 bankruptcy: A complete guide

Description:

 

If you had a bankruptcy discharged a year or more ago, you may be starting to reorganize your finances. Perhaps you're even considering purchasing a home. The good news is that everything is feasible in buying a house after chapter 7 bankruptcy. Fortunately, you can still qualify for an FHA loan after Chapter 7. However, you should expect to wait a while before being approved. Getting a loan will be extremely difficult for the first few years after a bankruptcy

 

If you filed for bankruptcy more than a year ago, you may be starting to reorganize your finances. Perhaps you're thinking about buying a house. The good news is that it is possible to buy a house after declaring bankruptcy under Chapter 7 or Chapter 13.

 

However, there is a waiting period before you can get a mortgage, which is usually at least two years. In addition, lenders will carefully examine your credit score, credit reports, bankruptcy discharge details, and other factors to ensure you qualify. After bankruptcy, proceed with caution and take steps to improve your credit. You'll eventually be able to get a home loan if you work hard and have patience.

Waiting periods for purchasing a home after Chapter 7

This guide will let you know about buying a house after chapter 7 bankruptcy.  After a bankruptcy is discharged, it will take time to rebuild your credit and savings to the point where you can buy a home. Before they will approve you for a new mortgage, lenders will want to know that your financial situation has fully recovered.

As a result, lenders impose a minimum waiting period, known as a "seasoning period," before borrowers can apply for a mortgage after filing for bankruptcy.

Some lenders, for example, will require you to wait three years before applying for an FHA loan, rather than the two–year minimum required by the Federal Housing Administration.

There are some unusual circumstances in which borrowers can be approved before the two–year mark, which we will discuss below. However, for the vast majority of prospective home buyers, these minimums will be strictly enforced.

Take the time to improve your credit score and save for a larger down payment. Both strategies will assist you in obtaining a lower mortgage rate and a more affordable home loan when the time comes to buy.

Is it important to discharge bankruptcy completely?

Understand that the 2– to 4–year waiting period after Chapter 7 bankruptcy does not begin until your bankruptcy is discharged or dismissed by a court.

That occurs at the conclusion of the bankruptcy proceedings, which typically occurs 4–6 months after the initial filing.

If you're counting down the days until you can apply for a mortgage, make sure you start your calendar on the correct date – the discharge or dismissal – because it will make a big difference in when you reach the two–year mark.

Can I buy a house a year after being discharged from Chapter 7?

In most cases, you must wait at least two years after your Chapter 7 discharge date before you can be approved for a home loan.

Therefore, production resources engagement manager for Mortgage, "there are some limited circumstances in which you can obtain a loan after one year from the discharge."

"But only if your bankruptcy was caused by extenuating circumstances beyond your control and you've demonstrated an ability to manage your financial affairs responsibly since."

Such 'extenuating circumstances' could apply if you were forced to declare bankruptcy due to a serious illness, job loss, or income reduction..

FHA loans after Chapter 7 bankruptcy

Fortunately, you can still qualify for an FHA loan after Chapter 7. However, you should expect to wait a while before being approved.

"Bankruptcy will not prevent you from making a large purchase in the future, such as a home." So, yes, an FHA home loan can be obtained after a Chapter 7 bankruptcy," says Jeremiah Heck, a debt and bankruptcy attorney.

"Typically, you must wait at least two years after your bankruptcy has been approved by the courts to be eligible."

However, in some cases, the mortgage lender may require more time.

Is it hard to buy a house after bankruptcy?

 

“"Getting a loan will be extremely difficult for the first few years after a bankruptcy.” home buyers who apply after filing for bankruptcy can often expect higher down payments and interest rates.

"Your priority should be to rebuild your credit in order to apply for a mortgage loan when you're ready.

 

 

Remember that a bankruptcy filing will appear on your credit reports for ten years.

"This has no bearing on your ability to purchase a home." "However, it's realistic to expect a lender to take that into account when reviewing your loan request," warns Heck. "I would estimate that it will take two to three years to rebuild your financial health after a bankruptcy."