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Dan Green

Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. .

Portrait Of Young Man With Dog Buying A House After Bankruptcy

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Buying a House After Bankruptcy Is Possible: Here’s How

Roughly 1% of U.S. households file for bankruptcy each year, and many will be eligible to buy a home within 2 years of their bankruptcy discharge.

Here’s why:

  • 62% of bankruptcies are related to medical debt and collection
  • 92% of people who file for bankruptcy never file again
  • Only five percent of bankruptcies stem from reckless spending

Mortgage lenders know that filing for bankruptcy is sometimes necessary and that consumers aren’t always at fault. So, mortgage rules define a clear home-buying timeline so consumers with bankruptcy can stop renting and start owning.

This article discusses how to buy a home after bankruptcy. It discusses the different mortgages, how long after bankruptcy you can buy a home and the fastest ways to improve your credit score.

How Bankruptcy Affects Your Ability To Get A Mortgage

Experiencing bankruptcy lowers your credit rating and creates other temporary obstacles to homeownership.

For example, in the first two years after filing for bankruptcy, a home buyer cannot be mortgage-approved through one of the government’s five mortgage agencies. A two-year waiting period is required.

After two years, homeownership pathways widen.

  • 24 months after discharge, FHA and VA mortgages are available to home buyers
  • 36 months after discharge, USDA mortgages are available to home buyers
  • 48 months after discharge, conventional mortgages are available to home buyers

Mortgage lenders don’t discriminate against buyers with bankruptcy. Instead, lenders are interested in the bankruptcy circumstances and how the buyer has managed credit since discharge.

On-time payment histories are required, and credit scores must be in recovery. 

FHA loans require credit scores of 500 or higher, and other government-backed mortgage loans require a minimum 620 FICO score.

Lenders will also confirm that the bankruptcy gets officially discharged by court order and that no new debts got added to the filing.

How Long After Bankruptcy Can You Buy A House?

Most home buyers can get approved for a mortgage 24 months after discharge from Chapter 7 bankruptcy or immediately after discharge from Chapter 13 bankruptcy.

Chapter 7 completely wipes out all debt. Chapter 13 is a reorganization of debt based on a payment schedule. Because of the way the two impact debt, each requires a different waiting period timeline.

Waiting periods for both Chapter 7 and Chapter 13 bankruptcies can be reduced for buyers with extenuating circumstances – often by half.

An extenuating circumstance is a one-time event beyond the buyer’s control that reduces income sharply or creates a catastrophic increase in debt.

Common examples of extenuating circumstances include:

  1. Loss of income because of divorce
  2. Loss of income because of job loss
  3. Large medical bills

Claims of extenuating circumstances require supporting documentation and a reasonable explanation for how the event caused the bankruptcy. 

Chapter 7 Bankruptcy Waiting Periods

The waiting period to buy a home after a Chapter 7 bankruptcy ranges from two to four years—depending on your mortgage type.

From the date of discharge:

  • FHA loans: 2-year waiting period
  • VA loans: 2-year waiting period
  • USDA loans: 3-year waiting period
  • Conventional loans: 4-year waiting period

The FHA allows a 12-month waiting period for buyers with extenuating circumstances, and Fannie Mae and Freddie Mac allow a two-year waiting period.

Chapter 13 Bankruptcy Waiting Periods

The waiting period to buy a home after a Chapter 13 bankruptcy ranges from zero days to two years—depending on your mortgage type.

From the date of discharge:

  • FHA loans: No waiting period
  • VA loans: No waiting period
  • USDA loans: 1-year waiting period
  • Conventional loans: 4-year waiting period

A typical Chapter 13 bankruptcy period lasts between three and five years, depending on the amount of debt and the debtor’s annual income. 

With a Chapter 13 bankruptcy, your credit isn’t affected as much as Chapter 7, which stays on a credit report for seven years.

Waiting Period for Each Loan Type (Based on Discharge Date)

Loan TypeChapter 7Chapter 13
FHA loans2 yearsNone
VA loans2 yearsNone
USDA loans3 years1 year
Conventional loans4 years4 years

What Type Of Mortgage Can You Get After Bankruptcy?

Home buyers can apply for any mortgage after bankruptcy. So long as the buyer meets the required waiting period and credit score minimums, the mortgage can be approved.  

Here are five mainstream mortgage programs for buyers with a recent Chapter 7 or Chapter 13 bankruptcy.

FHA Loans

  • 580 credit score minimum
  • 3.5 percent minimum down payment
  • Shortest waiting period for buyers coming out of bankruptcy
  • Mortgage insurance required
  • Available to everyone

VA Loans

  • 620 credit score minimum
  • No downpayment required
  • Shortest waiting period
  • No mortgage insurance required
  • Available to active military, veterans, and surviving spouses

USDA Loans

  • 580 credit score minimum
  • No downpayment required
  • Lowest interest rates, typically
  • Reduced mortgage insurance required
  • Available in rural areas and lower-density suburbs 

Conventional Loans – Fannie Mae

  • 620 credit score minimum
  • 3 percent downpayment required
  • Subsidized mortgage rates for lower-income households
  • Mortgage insurance required with less than 20% down
  • Longest waiting periods post-bankruptcy

Conventional Loans – Freddie Mac

  • 620 credit score minimum
  • 3 percent downpayment required
  • Subsidized mortgage rates for lower-income households
  • Mortgage insurance required with less than 20% down
  • Longest waiting periods post-bankruptcy

Get pre-approved to see whether you qualify for these loans.

How To Get Better Mortgage Rates After Bankruptcy

Bankruptcies are common and don’t affect a person’s ability to apply for a mortgage. Lenders treat bankruptcies like other credit events. Eligible buyers can still get mortgage-approved.

However, when buying a home after bankruptcy, you can improve your access to lower mortgage rates and low-down payment loans by raising your credit score by even a little.

Take these steps to improve your credit and get pre-approved for a mortgage.

1. Establish new credit

Secured credit cards and credit builder companies like StellarFi help improve credit. These allow you to establish new credit and pay it off in small, manageable payments that creditors like the see.

2. Keep balances low

Once you’ve started to take on new debt, be sure to keep your balances low. You don’t need to pay them off in full. Keeping a low running balance that you pay each month is good because it shows you can manage debt.

3. Pay it off on time

While maintaining new debt, the most important thing is to pay it on time. Missed payments have the most significant impact on your credit score.

4. Get pre-approved

A mortgage pre-approval is like a dry-run of the mortgage process. This pre-approval will prepare you for a mortgage by helping you build a budget, show you rates, and check your credit score. When it comes to buying, a pre-approval will prove to the buyer that you are prepared and serious about your offer.

You can get pre-approved with Homebuyer in just three minutes.

FAQ About Buying a Home After Bankruptcy

Can I buy a house under my name if my spouse filed for bankruptcy?

Yes, you can apply for a mortgage without your spouse. Your lender won’t consider the bankruptcy filing as part of the mortgage application. However, the application may not use your spouse’s income or assets to help you qualify. 

How long after discharge from Chapter 13 bankruptcy can I buy a home?

Home buyers can buy a home immediately after discharge from Chapter 13 bankruptcy with an FHA-backed or VA-backed loan. A two-year wait is necessary after Chapter 7 bankruptcy.

After a bankruptcy, should I establish credit for a few years or buy a home immediately?

Raising your credit score can get you better rates and access to different types of loans. However, the money you spend on rent while trying to raise your score typically won’t offset the amount you save with a higher credit score.

How long does it take for a bankruptcy to get removed from a credit report?

Although bankruptcies stop affecting credit scores after two years, they remain on credit reports for seven years following a Chapter 13 and 10 years following a Chapter 7. 

Can I buy a second home after bankruptcy?

You can purchase a second home after bankruptcy. Bankruptcy events are treated like other credit events and don’t prevent buyers from getting access to mortgages.

What is the waiting period to buy a home if I’ve had more than one bankruptcy?

Home buyers with multiple prior bankruptcies can wait as long as five years. 

What are examples of extenuating circumstances for bankruptcy?

Mortgage lenders reduce waiting periods after bankruptcies from extenuating circumstances. Extenuating circumstances include loss of income after a divorce, large medical bills or inability to work after injury or illness, and unexpected job joss. 


What to do next

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       Roughly 1% of U.S. households file for bankruptcy each year, and many will be eligible to buy a home within 2 years of their bankruptcy discharge. Here’s why: Mortgage lenders know that filing for bankruptcy is sometimes necessary and that consumers aren’t always at fault. So, mortgage rules define a clear home-buying timeline so consumers […]

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