Written by Dan Green
Dan Green
Dan Green (NMLS 227607) is a licensed mortgage professional who has helped millions of people achieve their American Dream of homeownership. Dan has developed dozens of tools, written thousands of mortgage articles, and recorded hundreds of educational videos. Read more about Dan Green.
This website discusses mortgage programs and how to qualify. Your eligibility may vary based on lender guidelines and investor overlays. Check with your lender for specific details.
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This article was checked for accuracy as of October 2, 2024. Learn more about our commitments to accuracy and your mortgage education in our editorial guidelines.
Updated: October 2, 2024
Roughly 1 out of 10 U.S. households file for bankruptcy each year. Many are eligible to buy a home within 2 years of their bankruptcy discharge.
Here’s why lenders allow individuals with a bankruptcy to buy a home:
Mortgage lenders understand that filing for bankruptcy is sometimes necessary and that consumers aren’t always at fault. As a result, 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 outlines different mortgage options, how long after bankruptcy you can buy a home, and the fastest ways to improve your credit score.
Experiencing bankruptcy lowers your credit rating and creates temporary obstacles to homeownership.
For example, in the first two years after filing for bankruptcy, a homebuyer cannot be approved through one of the government’s five mortgage agencies. A two-year waiting period is required.
After two years, more homeownership options become available.
Mortgage lenders do not make blanket judgments against buyers with bankruptcy. Instead, lenders evaluate the bankruptcy’s circumstances and how the buyer has managed credit since the discharge.
On-time payment histories are required, and credit scores must show signs of 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 is officially discharged by court order and that no new debts have been added to the filing.
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 eliminates debt, while Chapter 13 reorganizes debt based on a payment schedule. Due to the differences in how they impact debt, each requires a different waiting period.
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 significantly reduces income or creates a catastrophic increase in debt.
Common examples of extenuating circumstances include:
Claims of extenuating circumstances require supporting documentation and a reasonable explanation for how the event caused the bankruptcy.
The waiting period to buy a home after a Chapter 7 bankruptcy ranges from two to four years, depending on the mortgage type.
From the date of discharge:
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.
The waiting period to buy a home after a Chapter 13 bankruptcy ranges from zero days to two years, depending on the mortgage type.
From the date of discharge:
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, credit isn’t affected as severely as Chapter 7, which remains on a credit report for seven years.
| Loan Type | Chapter 7 | Chapter 13 |
| FHA loans | 2 years | None |
| VA loans | 2 years | None |
| USDA loans | 3 years | 1 year |
| Conventional loans | 4 years | 4 years |
After bankruptcy, home buyers can still apply for various types of mortgages. Once the required waiting periods and minimum credit score criteria are met, buyers may be eligible for mortgage approval.
Below are five common mortgage programs available to buyers with a recent Chapter 7 or Chapter 13 bankruptcy, along with their basic eligibility requirements. Keep in mind that some lenders may impose additional restrictions, known as investor overlays, which could affect the waiting period or credit score requirements for approval.
Bankruptcies are common and don’t affect an individual’s ability to apply for a mortgage. Lenders treat bankruptcies like other credit events. Eligible buyers can still get mortgage approval.
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, even if it’s by a small amount.
Take these steps to improve your credit and get pre-approved for a mortgage:
Secured credit cards and credit builder companies can help improve your credit. These allow you to establish new credit and pay it off in small, manageable payments that creditors like to see.
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 shows you can manage debt responsibly.
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.
A mortgage pre-approval is like a practice 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 show the seller you are prepared and serious about your offer.
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.
Home buyers can purchase 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.
Raising your credit score can help you access better rates and a wider variety 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.
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.
Yes, you can purchase a second home after bankruptcy. Bankruptcy events are treated like other credit events and don’t prevent buyers from accessing mortgages.
Home buyers with multiple bankruptcies may need to wait as long as five years.
Mortgage lenders reduce waiting periods after bankruptcies caused by extenuating circumstances. Extenuating circumstances include loss of income after a divorce, large medical bills, inability to work after injury or illness, and unexpected job loss.
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Roughly 1 out of 10 U.S. households file for bankruptcy each year. Many are eligible to buy a home within 2 years of their bankruptcy discharge. Here’s why lenders allow individuals with a bankruptcy to buy a home: Mortgage lenders understand that filing for bankruptcy is sometimes necessary and that consumers aren’t always at fault. […]
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