Getting A Mortgage After Bankruptcy: How Long Do I Have to Wait?
Getting a mortgage after bankruptcy can be a challenge, but it’s not impossible. Standard loan programs allow borrowers who’ve emerged from bankruptcy to get a mortgage approval after completing a waiting period and meeting other eligibility requirements.
If you’re thinking of homeownership after going through the bankruptcy process, you’ll first need to understand how bankruptcy impacts your odds of getting a loan, and which mortgage programs might be the best fit for you.
- The fastest path to getting a mortgage after bankruptcy is to take out a non-QM loan, since they typically don’t have a waiting period. But they do come with higher costs and risks.
- The traditional mortgage programs with the shortest waiting periods after a bankruptcy are government-backed (FHA, VA and USDA loans).
- The mortgage programs with the lowest credit score requirements are FHA and VA loans, which can mean a shorter path of credit improvement to travel after bankruptcy.
Can you get a mortgage after bankruptcy?
Yes, you can — and it isn’t as difficult as you might think.
A bankruptcy will affect your credit score and trigger a waiting period before you’re eligible to take out a new mortgage. But as long as you can get your credit score back up in the 500 to 620 range, you’re likely to find lenders willing to give you a home loan once your waiting period ends.
Waiting periods: How long after bankruptcy can you get a mortgage?
You’ll need to wait between one and four years after a bankruptcy to get a traditional mortgage, such as a conventional, FHA, VA or USDA loan.
The exact amount of time depends on which type of bankruptcy you filed.
You may be able to get a mortgage immediately after a bankruptcy if you can afford the large down payment and high interest rates that typically come with non-qualified (non-QM) mortgage programs.
Here’s a quick look at the waiting periods for each loan type:
| Loan type | Chapter 7 bankruptcy waiting periods | Chapter 13 bankruptcy waiting periods |
|---|---|---|
| Conventional | Four years (two years with extenuating circumstances) | |
| FHA | Two years (one year with extenuating circumstances) | One year |
| VA | Two years | One year |
| USDA | Three years | One year |
| Non-QM | No waiting period | No waiting period |
It’s possible to buy a home the day after completing a bankruptcy if you have the resources to pay the agreed-upon price. If you have a family member willing to gift you funds, have access to a private loan from a friend or relative, or can wrangle up enough down payment funds to get a hard money loan, you could purchase a home immediately after completing a bankruptcy.
Mortgage options after bankruptcy: What you may qualify for
| What you’re looking for: | Shortest waiting period after Chapter 7 | Shortest waiting period after Chapter 13 | Low credit score requirement (500-579) | Fair credit score requirement (580-619) |
|---|---|---|---|---|
| Your best loan options: | FHA loan | FHA, VA or USDA | FHA loan | FHA or VA loan |
| Why it’s best: | You’ll only wait two years versus four years for a conventional loan. | All government-backed loans require you to wait only one year from discharge. | The only loan type that typically accepts credit scores below 620. | Both loan types accept scores below the conventional 620 minimum. |
Most lenders offer “bankruptcy home loans,” which are simply mortgages for borrowers with a bankruptcy in their credit history. Be honest about your bankruptcy and be prepared to provide all of your legal paperwork. Getting a mortgage after bankruptcy will go much more smoothly if you know what lenders need ahead of time.
Here’s a table showing the full details about mortgage requirements after bankruptcy:
| Loan Type | Minimum Credit Score | Minimum Down Payment | Special Requirements |
|---|---|---|---|
| Conventional | 620 | 3% | None |
| FHA | 580 with 3.5% down; 500 to 579 with 10% down | 3.5% to 10% |
|
| VA | No official minimum (Most lenders require 620) | 0% |
|
| USDA | No official minimum (Most lenders require 620) | 0% |
|
| Non-QM | Varies by lender | Varies by lender |
|
How to apply for a mortgage after bankruptcy
- Gather your bankruptcy paperwork. Most lenders require proof of at least your bankruptcy discharge (or dismissal, if applicable) to determine how many years have elapsed since your bankruptcy was completed.
- Be prepared to clean up your credit report. If your credit report still shows you owe money for accounts that were discharged, you may need to provide all of your schedules to show your lender the accounts were included. Although you should limit credit use after a bankruptcy, you’ll also need to show the lender you’ve been able to manage your finances since the bankruptcy discharge. Opening small secured credit cards and paying them off may help demonstrate your ability to manage credit again.
- Determine your discharge or dismissal date. There are a number of dates on bankruptcy paperwork, but the most important one for getting a mortgage after bankruptcy is your discharge or dismissal date. This is the “official” date your bankruptcy was completed, and starts the clock on the waiting period calculation.
- Choose a program you qualify for. Make sure you match up your credit score and waiting period with the right loan program. For example, if your credit score is 600 and it’s been two years since a Chapter 7 bankruptcy discharge, an FHA loan is probably your best bet (if you make too much for a USDA loan or don’t have any military service for a VA loan).
- Shop lenders. Some mortgage companies add extra guidelines for borrowers with a bankruptcy in their credit history. You may need to shop with more lenders to find a loan officer with experience originating bankruptcy home loans.
- Provide extra proof you’re ready to repay a mortgage. Be prepared to write letters of explanation and explain to the underwriter why you’re ready to get a mortgage after a bankruptcy. Lenders may need extra reassurance that the circumstances that led to your bankruptcy won’t repeat and cause you to default on your mortgage.
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