Finding a Mortgage After a Bankruptcy
If you have a bankruptcy that was discharged within the past two years, you still may be able to find a mortgage even when your local bank has turned you down. There are mortgages for people with bankruptcies from niche lenders who are helping these individuals to finance their new home purchase.
Why is it Difficult to Qualify for a Mortgage with a Bankruptcy?
If you have a recent bankruptcy and tried to qualify for a mortgage from a lender like Bank of America or Wells Fargo, you unfortunately found out that they are not interested in helping you. Those lenders are adhering to the Fannie Mae guidelines which have specific waiting periods before they will consider you for a mortgage.
Which Lenders Offer Mortgages with Bankruptcies?
There are a small number of nonprime lenders who offer loan programs for people who have had a bankruptcy discharge within the past two years. These lenders specialize in these programs and are found online and not in a brick and mortar building in your town.
What are the Requirements to Qualify?
If you want to qualify for a mortgage with a recent bankruptcy, you will likely need to meet the following requirements:
- Credit score of at least 500
- Minimum of 20% down
- The home must be your primary residence (1-4 units)
- No recent late mortgage payments
- Loan amount minimum is typically $100,000
These are just some basic requirements and they will vary by lender. The best part about the program above is it eliminates the need to follow the usual waiting periods outlined below.
Applying for a Mortgage After Chapter 7 Discharge
A chapter 7 bankruptcy typically means that all of your debt is excused including any current mortgage that you may have. A chapter 7 bankruptcy is the most typical type that we see from mortgage applicants today.
According to the Fannie Mae guidelines, you will require you to wait two years from the discharge date after a chapter 7 bankruptcy before you can apply for a home loan. You should have started to work on improving your credit despite the recent bankruptcy.
Applying for a Mortgage After Chapter 13 Discharge
A chapter 13 bankruptcy is one where your debt is not excused but instead you agree to a specific payoff plan. With a chapter 13 bankruptcy, you may be able to get approved with less than a 2 year waiting period. It will require you to have been making on time payments since the discharge and have established a positive track record since the bankruptcy plan went into effect. You may be able to get the waiting period knocked down to just 1 year.
Applying for an FHA loan after a Bankruptcy
The FHA guidelines require you to wait at least 2 years after a chapter 7 bankruptcy, and 1 year after a chapter 13 bankruptcy. There are few exceptions allowed which may include bankruptcies due to medical emergencies or being deployed by the military. Getting approval for exceptions is extremely rare.
Conclusion
If you had a recent bankruptcy, you still may be able to purchase your dream home. There are some options for you from various niche lenders who offer these unique mortgage programs. You can even qualify for a mortgage with a 500 credit score. However, you will likely need to come to the table with at least 20% down and show that you are making progress towards improving your credit.
Helpful Resources
Are No Documentation Loans Still Available?
Bad Credit Mortgages are Becoming Mainstream
Bad Credit Mortgage Information
