Although bankruptcy will lower your credit score, most individuals who file can qualify for a new home loan within a few years. Different lenders and types of mortgages have different guidelines about approving clients with a previous bankruptcy.
If you are struggling with debt and considering bankruptcy, explore your options for buying a home in the future.
FHA loans
Insured loans from the Federal Housing Authority are often within reach after a few years of bankruptcy. FHA mortgages offer down payments as low as 3.5% of the home price and approval for credit scores as low as 580 (500 with a 10% down payment).
Individuals who file for Chapter 7 bankruptcy can receive FHA loan consideration within two years of the discharge date. However, you must demonstrate a good credit history in the years since filing for bankruptcy or that you did not open any new credit accounts within that time. If you can show that factors beyond your control contributed to the bankruptcy, such as a medical catastrophe, you can apply for an FHA mortgage 12 months after Chapter 7 discharge.
If you file for Chapter 13, you can apply for an FHA mortgage after making 12 successful months of payments under your bankruptcy plan, showing that you are unlikely to file bankruptcy again and receiving approval to buy a home from the bankruptcy court.
Other mortgage options
You can also explore home loan options beyond the FHA loan after bankruptcy. The United States Department of Agriculture loan program offers low-interest, 0% down payment mortgages to buyers in rural areas who earn less than the maximum income threshold for this type of loan. USDA may approve buyers who are at least three years out from a Chapter 7 discharge. Chapter 13 requirements are the same as for an FHA loan.
Veterans Administration loans are available to qualifying veterans and family members two years after a bankruptcy filing. For a conventional loan, most lenders require a 24-month waiting period after bankruptcy filing.
