Can you buy a house after bankruptcy?

By
Mortgage and Lending with University Lending Group NMLS# 133950

If you have some credit problems in your past, you may be wondering if you can buy a house after bankruptcy.  YES YOU CAN!  Bankruptcy is like a fresh start.  The past is the past and you move on from there.  There are things you need to do in order to prepare for a home purchase and certain rules about how long you must wait in order to be eligible for home financing.

The most important thing you can do after your bankruptcy is final is to re-establish credit.  If you had credit accounts which had been around for awhile with a good history and a small or zero balance, make contact with those creditors and let them know that you intend to re-affirm your debt and wish to keep your account open. This has the effect of giving you a longer credit history with that account which is a very good thing when your credit scores are being established.  The next thing to do is to get some new credit.  Many credit card issuers (Capital One comes to mind) offer credit cards to people who have had a recent bankruptcy because they know you won't be able to file again for seven years.  Maybe a secured credit card is a good way. This is how that type of account works:  You open a savings account with  a set amount of money, say $300.  The lender attaches a credit card to that account and the credit limit is the amount of the deposit.  While you have that credit card and it's attached to the savings account, you don't have access to the savings, but you can use the credit card up to the credit limit. Lake Trust Credit Union offers that type of an account. One caution with credit cards though - never owe more than 30% of the credit limit if you want to have the best possible credit score.  It's important to get your new (or old) credit accounts going as soon as you can after your bankruptcy is final.  That gives more time for good credit scores to develop before you buy a house.  

Now  you need to wait.  The rules about how long  you must wait depends on what kind of loan  you plan to use. 

Conventional:

  •      Chapter 7 (most common) - 4 years from either the dismissal or discharge date
  •      Chapter 13 - 2 years from the discharge date or 4 years from the dismissal date

FHA:

  • Chapter 7 - 2 years from either dismissal or discharge date
  • Chapter 13 - does not have to be discharged.  There is no waiting period into the structured repayments.  We must document that all payments have been made on time and you need to get the court's permission to enter into a new mortgage.

Rural Development:

  • Chapter 7 - 3 years from either dismissal or discharge date
  • Chapter 13 - You must be at least 12 payments into the repayment period, document that all payments have been made on time and have the court's permission to enter into a new mortgage.

VA:

  • Chapter 7 - 2 years from discharge
  • Chapter 13 - You must be at least 12 payments into the repayment period, document that all payments have been made on time and have the court's permission to enter into a new mortgage.

So don't despair!  You've been through hard times, but you CAN buy a house after bankruptcy!

Posted by

Peggy Wilson

License #13950

734.238.3MTG (684)

peggy@peggyloans.com

Comments (2)

Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

I have helped a few get a home since the melt down.  Thank you for the blog.

Sep 17, 2013 12:08 AM
Peggy Wilson
University Lending Group - Ann Arbor Township, MI
Michigan Mortgage Pro

Thanks, Tim.  Some people just feel so helpless after bankruptcy and foreclosure.  I just want them to know that there IS hope!

Sep 17, 2013 12:48 AM