You may be asking yourself, can I qualify for a home loan after filing bankruptcy, if you think bankruptcy might be the route you need to take to eliminate or reorganize your debts. There are a lot of myths out there, and the biggest one is probably that you will never qualify for credit or any kind of loans ever again after filing for bankruptcy. This is simply not true and there are a lot of credit options awaiting debtors after they have received a bankruptcy discharge.
With that said, debtors should retain all of their bankruptcy paperwork after a bankruptcy case has been filed, and realize there may be some wait time involved depending on the chapter of bankruptcy you have filed. To be clear, filing for bankruptcy does not prevent you from obtaining a home loan at some point in the future. Attorney Richard Symmes discussed whether you can qualify for a home loan after filing for bankruptcy on 1150 KKNW Radio and you can listen to that segment here:
Improving Your Credit Score After Bankruptcy Filing
While many consumers report that their credit scores improve after filing for bankruptcy, that may not be the case if you had really good credit prior to filing for bankruptcy. Most consumers I talk to after filing bankruptcy typically end up in the 600’s with regards to their credit score and to qualify for the best home loans you should try to have a 740 score or higher. There are some tricks to rebuilding your credit score and it may take some work and being proactive about it, but it is possible to be in a good position to purchase a home when you are eligible after your get a bankruptcy discharge.
Consumers often report that they receive solicitations for new credit after they have received a bankruptcy discharge. This can be a good way to rebuild credit by obtaining new credit lines and paying them off in full every month. The higher the available credit limit you are able to get approved for the better. You may even be eligible to to get a second credit card or a secured credit card that functions like a debit card and gets reported to the credit agencies, or a personal loan that you can make payments on that will report the credit bureaus as well.
One easy trick if you are not able to obtain credit is to ask a friend or family member to add you as an authorized user to their credit cards. This does not harm their credit at all and they don’t need to give you access to any cards. Simply by doing this, their credit for that card will now report on your credit history. The higher the limit on the cards the better, just make sure your authorized user pays down the cards and is never late or that could negatively affect you as well.
Having a good credit history after you have a clean slate after bankruptcy discharge showing that you have paid off your debts every month shows you are responsible for your debts and have credit utilization which may increase your score. Keep in mind that the higher your credit score is, the better terms you will get on your interest rate with any kinds of debt you have so working on your credit is a must.
What kind of Mortgage Can I Get After Bankruptcy Discharge?
Each type of mortgage loan that you can get after filing for bankruptcy will have separate requirements. Below, are the most common types of mortgage loans and how to qualify after filing bankruptcy.
FHA Loans
The Federal Housing Administration insures FHA loans. Your bankruptcy must have been discharged at least two years prior for you to qualify. If you have filed for Chapter 13 bankruptcy, you may be eligible right after you complete your bankruptcy repayment plan as you generally cannot incur debt while in a bankruptcy without court approval.
VA Loans
The Department of Veteran Affairs offers VA loans to United States Military veterans. You must wait two years after Chapter 7 bankruptcy to apply and possibly after your chapter 13 bankruptcy is complete and meet one of the following additional qualifications:
- You served at least 181 days during peacetime
- You served at least 90 days during wartime
- You served for at least six years in the National Guard
USDA Loans
The United States Department of Agriculture offers USDA mortgage loans to consumers looking to buy real estate in a rural area. You will not be eligible for USDA loan until three years after your Chapter 7 bankruptcy case has been discharged.
Conventional Loans
Unlike the other mortgage loans described, a conventional mortgage is not backed by a government agency. The typical waiting period for a conventional mortgage loan after a Chapter 7 bankruptcy discharge is four years. However, many non-government lenders have their own waiting period requirements so you will need to reach out to individual lenders and bank to determine your options.
If you live in Washington State, and have questions about whether you will qualify for a home loan after filing for bankruptcy, give Symmes Law Group a call at 206-682-7975 or contact us to get the counsel you need.
