Mortgage After Bankruptcy: Waiting Periods and Loan Options

If you want to get a mortgage after bankruptcy, the good news is that it is possible. But you’ll need to keep an eye on post-bankruptcy waiting periods and focus on rebuilding your finances before jumping into a home loan application.

This guide explores how to get home loans after bankruptcy.

Can You Get a Mortgage After Filing for Bankruptcy?

It’s possible to get a mortgage after filing for bankruptcy. However, you’ll likely need to wait at least one to four years between your bankruptcy and your mortgage application. The exact timeline varies based on the underwriting guidelines of the specific mortgage type you have in mind and the type of bankruptcy you filed.

How Long After Bankruptcy Can You Get a Mortgage?

Generally, borrowers must wait between one and four years after a bankruptcy discharge to get a mortgage. For government-backed loans, like FHA, VA, and USDA mortgages, the waiting period is typically one to three years. The waiting period is a bit longer for conventional loans.

Here’s a look at how the type of bankruptcy may come into play:

• Chapter 7 bankruptcy: Typically, the waiting periods are longer after filing Chapter 7 bankruptcy, ranging from two to four years, depending on the loan type.
• Chapter 13 bankruptcy: After Chapter 13 bankruptcy, the waiting periods are often shorter, ranging from 12 months to two years.

Bankruptcy Waiting Periods by Loan Type

Post-bankruptcy waiting periods vary based on the type of mortgage you apply for. The table below breaks down the average wait by mortgage type.

*In general, borrowers with a Chapter 13 bankruptcy may be eligible for a mortgage after making at least 12 consecutive months of on-time payments under their court-approved repayment plan, with approval from the bankruptcy court or trustee.

Of course, simply waiting long enough after a bankruptcy before applying for a mortgage doesn’t guarantee approval. The lender will also look at your overall financial situation, including your income, credit score, and more.

A lender may also potentially look at the reasons for your bankruptcy to determine your eligibility for a home loan. For example, the VA Lenders Handbook provides detailed requirements that take the reason for bankruptcy into account.

How Bankruptcy Affects Homebuying

After filing for bankruptcy, lenders may automatically dismiss your mortgage application for the waiting period. But after the waiting period is over, the lingering financial effects of your bankruptcy can still limit your chances of successfully obtaining a home loan. For example, credit score requirements and concerns about your financial stability may reduce your chances of loan approval.

Repairing Your Credit After Bankruptcy

As you look to get a mortgage, you’ll quickly realize that most loans have strict credit score requirements. Even if you get approved with a low credit score, you'll often face significantly higher mortgage rates. Since bankruptcy tends to tank your credit score, it’s important to rebuild this number before applying for a home loan. Here are some strategies to try:

• Pay your bills on time: After bankruptcy, make it a point to pay all of your bills on time each month.
• Don’t apply for too much credit: If possible, avoid applying for too many credit products, like credit cards, personal loans, and auto loans, in quick succession.
• Use a secured credit card: If you can’t get an unsecured credit card, try a secured one. Make sure to keep up with the payments.

How to Get a Home Loan After Bankruptcy

If you’re looking to buy a home after bankruptcy, it’s possible. Consider following the steps below:

1. Confirm your eligibility: Start by looking into loan-specific post-bankruptcy waiting periods. This is a starting point for qualifying for a mortgage.
2. Explore loan options: You’ll need to choose the right type of mortgage, which starts with a closer look at your loan options.
3. Get prequalified: After choosing the right home loan, get prequalified. This will give you a better idea of whether or not you can move forward with a home purchase right now.
4. Apply and close: Once you find the right home, it’s time to apply for the loan. If approved, you can close on the mortgage.

Buying a House After Bankruptcy FAQs

Still have questions about getting a mortgage after bankruptcy? The following answers may help.

Can You Get an FHA Loan After Bankruptcy?

Yes, it’s possible to get an FHA loan after bankruptcy. However, you’ll likely need to wait at least two years after a Chapter 7 bankruptcy and one year after a Chapter 13 bankruptcy.

Can You Get a VA Loan After Bankruptcy?

It’s possible to get a VA loan after bankruptcy. Typically, you must wait two years after a Chapter 7 bankruptcy and one year after a Chapter 13 bankruptcy.

Can You Get a USDA Loan After Bankruptcy?

Yes, borrowers may be able to get a USDA loan one to three years after bankruptcy.

Can You Get a Conventional Loan After Bankruptcy?

Yes, it’s possible to get a conventional loan after bankruptcy. Generally, you’ll need to wait at least two to four years between bankruptcy and applying for a conventional home loan.

Final Thoughts: Getting a Home Loan After Bankruptcy

If you’re looking to buy a home after bankruptcy, you’ll likely need to wait a few years. But after the waiting period is over for the loan type you have in mind, you can apply for a new home loan. It’s a good idea to use the waiting period to focus on rebuilding your credit and improving your financial situation. After all, the lender will look at many details before approving your home loan.