Bankruptcy doesn't ruin your mortgage opportunities
If you've filed for bankruptcy or have recently been laid off, you may be wondering if you can buy or refinance a new home.
The good news is that getting a mortgage is easier by chapter
13 Bankruptcy as Chapter 7.
You can even qualify while you are still in the chapter
13. You can apply for a mortgage as a mortgage with federally supported FHA, VA, and USDA loans
Already after a year in your repayment plan.
Remember that you need to make these payments on time. And
You still have to meet the credit requirements.
But if you follow these guidelines, you should have a good shot
when taking out a mortgage during or after Chapter 13.
Check Your Mortgage Eligibility (February 5, 2021)
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Like Chapter 13 bankruptcy
affects your mortgage eligibility
In many cases,
Mortgage lenders will approve your loan application while you are still working
through a chapter 13.
Lenders see applicants filing Chapter 13 cheaper than applicants
Filing for bankruptcy under Chapter 7. This is because the filers in Chapter 13 have a
Efforts to repay at least part of their debts.
is reflected in the minimum waiting time to get a loan after any type of loan
Chapter 7 bankruptcy: 2-3 years after dismissal Chapter 13 bankruptcy: 12 months after filing
Of course, there are a few additional hurdles to overcome if you want to buy real products
Estate in Chapter 13.
The lender needs to see that you have taken meaningful steps to improve your credit score
Debt Management Before It Approves You For A Home Loan.
The requirements for buying a home during or after Chapter 13 depend on the type of home
Mortgage that you hope to use.
Supported by the government
Loans are milder in relation to a Chapter 13 on your credit report, whereas
Compliant loans (backed by Fannie Mae and Freddie Mac) require a long wait
Chapter 13 Bankruptcy FHA Loans
To qualify for an FHA loan during Chapter 13, you must be at least 12 months of age
in your repayment plan. And you must have made all of these payments on time.
In addition, the bankruptcy court or the bankruptcy attorney must give in writing
Permission for you to take out a new mortgage loan.
You have successfully completed your repayment plan and received Chapter 13 discharge.
There is no waiting time for an FHA loan. However, your loan will be forwarded
for manual verification by an insurer, unless since
Discharge date. To get automated, computerized approval, there have to be two
Years since being released from Chapter 13.
This is an important point as many lenders do not manually approve a loan. You decline the loan unless it is given "approved" status by a computerized subscription system.
In this way, many lenders require a two-year waiting period from the discharge date.
However, an FHA mortgage is possibly the most attractive type of loan if you are currently on a Chapter 13 plan or have recently been laid off by one.
Benefits of a Chapter 13 FHA Loan
FHA loans have simpler loan requirements than other mortgage programs.
The federal housing administration, which insures these loans, only required a credit rating of 580 and a down payment of 3.5%.
You could even get away with a credit score of 500-579 if you can get 10% down. (You may have a harder time finding a willing lender, however.)
Other requirements you need to meet for an FHA
Your debt-to-income ratio (DTI) is less than 50%. You buy the house as your main residence. The loan is current FHA credit limitsYou have a steady job and a steady income
Most mortgage lenders are approved for FHA loans
You can shop for a good deal.
If a lender does not approve you because of your
Chapter 13, but you have passed the 12 month mark and meet the credit requirements. Try it
again with another mortgage company. You might be luckier.
Check Your FHA Loan Eligibility (February 5, 2021)
VA and USDA loans with Chapter 13 bankruptcy
FHA loans, VA and USDA loans are secured by the federal government. And you
have similar rules for qualifying with Chapter 13.
You need to be in your repayment schedule for at least 12 months, with
On-time monthly paymentsYou need written approval from the court or bankruptcy attorney
Applying for LoansYou must meet the loan program guidelines
You completed your full Chapter 13 plan and the court fired you there
There are no specific criteria for applying for a VA or USDA loan.
Both loan programs have similar advantages. No down payment is required and mortgage rates are usually very low.
To qualify for a VA loan, you must be an eligible veteran, service member, or surviving spouse.
The Department of Veterans Affairs does not technically set a minimum score
for these loans. However, most lenders require a FICO of at least 580-620.
USDA loans are for low- to middle-income home buyers in qualified rural areas.
These loans are very affordable, but a little harder to qualify. For a USDA loan, you must have a FICO score of at least 640. Chapter 13 borrowers may have better luck with an FHA mortgage.
Check Your Zero Down Loan Eligibility (February 5, 2021)
Compliant loan with Chapter 13 bankruptcy
much harder to get a compliant loan after Chapter 13 bankruptcy.
Mae and Freddie Mac – the two agencies that set compliant credit rules – are
stricter than government agencies. Borrowers cannot apply
as you work through a plan for Chapter 13.
Bankruptcy must either be fired or dismissed in order to qualify for a conventional
Mortgage. And there is a waiting period:
Two years after the chapter 13 release date. Four years after the chapter 13 release date
The discharge takes place after the 3 or 5 year repayment plan has been completed.
In total, it can take up to 7 years for you to submit Chapter 13
can get a conventional loan. (5 years until discharge plus 2 years waiting period
Filers that don't complete this
Plan may have "fired" their bankruptcy. You probably still owe theirs
Creditors and must wait at least 4 years
the termination date before they can submit an application
Filer with multiple
Bankruptcies will be in the past seven years
must wait at least seven years after their last release
It may be easier to buy a home after being released from Chapter 13 if your bankruptcy was in
caused by "extenuating circumstances".
Mitigating circumstances are usually one-time events beyond your control that have a serious negative impact on your finances.
Examples include serious illness or disability, dismissal from the company or the death of the main breadwinner.
If your chapter 13 falls into this category, the wait
The deadline for a conventional loan is 2 years after dismissal. (The wait
The period after discharge remains the same, at 2 years.)
Freddie Mac offers a clear test
to determine whether a bankruptcy has extenuating circumstances:
Were the events out of your control? Has the problem been resolved? Is the problem likely to recur?
Understand that these tests do not apply to every program. Talk to multiple lenders about your circumstances to learn when you will qualify for a loan application after a Chapter 13 discharge or discharge.
Check Your Conventional Loan Eligibility (February 5, 2021)
Alternative loan options with Chapter 13
An alternative mortgage
Programs (called Non-QM, Alt-A or Non-Prime) offer home loans to people in
Chapter 13 plans.
Non-qualified mortgages (Non-QM) do not meet the requirements
Government or Compliant Mortgage Standards. As such, they are not eligible
for helping Fannie Mae, Freddie Mac, or any federal agency.
Lenders take an additional risk, though
You choose to finance these mortgages and their cost is higher. But you can
Be appropriate when you want to borrow larger loan amounts or wait less time
Expect higher interest rates and fees on any of these mortgages.
Chapter 13 Discharge vs. Dismissal: How Fast Can I Apply?
for a mortgage?
Mortgage lenders see bankruptcy differently
Discharge and dismissal from bankruptcy.
A discharge means that you have completed your court order
Repayment plan. Lenders see this cheaper because it means you've done it
Your debts were paid on time and have worked hard to improve your finances.
If you want to buy a house after getting out of Chapter 13,
There is no waiting time for an FHA, VA, or USDA loan (provided you meet the loan
A waiting period of 2 years applies to a conventional loan
after Chapter 13 discharge.
However, if your bankruptcy was rejected rather than settled, this waiting period for a conventional loan is extended to 4 years.
The longer waiting time explains the fact that
The discharge according to Chapter 13 only takes place after your repayment period has expired
By default, at least 3-5 years have passed since your filing date.
The main benefit of applying for a VA or USDA loan is that you don't have to wait for your bankruptcy to be settled or dismissed.
You can apply for these mortgages in just 12 months
Your repayment plan.
That said, you might only qualify for one mortgage
Year after your submission for Chapter 13, you don't have to wait the full 5-7 years
for a compliant loan.
Technically the same goes for FHA, but many lenders do
will not consider the loan until two years after being laid off.
Check Your Mortgage Eligibility (February 5, 2021)
Tips on qualifying for a mortgage according to Chapter 13
Just meet the 12 month requirement for a government
The loan does not guarantee that you will qualify.
You will still need to meet the loan lending guidelines
Score, income, employment and down payment among others.
These must all be documented and checked during
You may need to provide additional documents based on your data
Chapter 13. Lenders may need copies of your bankruptcy petition as well
Discharge or discharge documents.
Finally, make sure you have the right budget
Remember that your mortgage payment includes taxes
and insurance as well as principal and interest. If you lower less than 20%,
This also includes private mortgage insurance or FHA mortgage insurance.
These additional costs can increase a mortgage payment
Before you get into the application process, put it aside
some time to think about your maximum budget for payments and the cost of
Home ownership fits in with your debt settlement plan.
Which Lenders Will Approve a Chapter 13 Loan?
VA, USDA, and sometimes FHA loans are available throughout
Chapter 13 Bankruptcy. Most of the major lenders are authorized to conduct FHA and VA
Loans. USDA mortgages are a little harder to find.
Remember, mortgage lenders can set their own loans
Regulate. Some may be more accessible to Chapter 13 borrowers than others.
Plus, if you aren't, you'll be luckier
"Borderline" – means that you are fully entitled to the type of loan you want.
If you're on the verge of qualifying – for
For example, if your score is exactly 580, then you have less income and want one
FHA Loans – It Might Be Harder To Get Approved
You need to look around and compare your options.
All mortgage borrowers should do their best
Interest rate. However, this is doubly important for Chapter 13 borrowers.
You're not just buying a good deal. You are looking for a lender who is ready to approve you.
Do You Qualify For A Mortgage?
A Chapter 13 bankruptcy on your credit history shouldn't do this
prevent you from getting a mortgage.
You may even be able to buy a home while
Chapter 13, if you are comfortable with your repayment plan and qualify
for the mortgage.
When you've worked hard to pay off debt, and
If you improve your financial situation in Chapter 13, you may be able to get one
Home loan a lot sooner than you think.
Check your new plan (February 5, 2021)