How soon can you qualify for a mortgage after bankruptcy?
How do you qualify for a mortgage after a previous bankruptcy?
As you can imagine, this is one of those common questions that we receive and in today’s video I will explain the differences between VA, FHA, USDA and Conventional qualifying requirements when a previous bankruptcy has occurred.
Remember, when it comes to qualifying for a mortgage after a bankruptcy, I always say, don’t be scared – be aware!
However, before we get started, don’t forget to take advantage of our Second Chance Service which is a great way to get access to an expert second opinion which can be especially helpful for those recent loan denials or if you are just in need of guidance on how to make the most out of your home loan qualification.
Just call or email to discuss your scenario and let us show you the “Metroplex” difference!
800-806-9836 Ext. 280
How long does it take to qualify for a mortgage after a bankruptcy?
As a starting point, many bankruptcies do not occur because of financial mismanagement, but instead due to third party events and circumstances that are outside of the individual’s control.
With that being said, once a bankruptcy has been discharged, waiting periods will apply that impact how quickly you can qualify for a mortgage.
In order to determine the available options, I have created this three step approach:
#1. Is it a Chapter 13 or Chapter 7 Bankruptcy?
Per USCourts.gov it provides the following descriptions:
“A chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.”
On the other hand, “A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code.”
#2. What are the VA, FHA, USDA, and Conventional bankruptcy waiting periods?
Once you have determined the type of bankruptcy, now apply the appropriate waiting periods:
|Chapter 13||Chapter 7|
|VA||1 Day||2 Years|
|FHA||1 Day||2 Years|
|USDA||1 Day||3 Years|
|Conventional||2 Years||4 Years|
While the waiting periods are longer for a Chapter 7 Bankruptcy with two years for VA and FHA, three years for USDA, and four years for a conventional loan, this still can provide flexibility.
However, qualifying for a mortgage after a Chapter 13 bankruptcy can be more favorable because VA, FHA, and USDA loans permit only one day after discharge while conventional programs only require a minimum of 2 years.
#3. Exceptions and Unique Cases
While these are the standard published guidelines, bankruptcy exceptions can apply and other unique circumstances may exist such as a dismissal or cases where a mortgage was included within the bankruptcy, which triggers additional underwriting requirements and further review.
In summary, it is possible to qualify for a mortgage after a bankruptcy, but minimum credit and qualifying conditions will apply and be careful you are working with a team that is educated and experienced on the available bankruptcy program guidelines and requirements.
Remember, we are here as a resource and let our experience go to work for you!
800-806-9836 Ext. 280
I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!
Qualifying for a home loan can be both difficult and overwhelming, but when you work with a lender that specializes and understands the loan process, it is a match that can open the door to home ownership.
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So, keep us in mind for your next pre-qualification or if you have a current transaction experiencing financing difficulty and need an expert opinion.
Whether it be USDA, FHA, Conventional or VA loans, just call or email to discuss your scenario and let us show you the "Metroplex" difference!
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