Mortgages after bankruptcy
It is important that you contact me as the earliest opportunity. Rebuilding your credit can take as long as 12 months. The sooner we start, the better! The table below shows the waiting periods (months) to get mortgage financing for a primary home (1-4 units) following bankruptcy. If you are interested in the details (and possible exceptions), check the reference materials.
|
Type of bankruptcy |
Reference |
||||
| # months following |
Discharge |
1st payout |
Discharge |
Dismissal |
Search for the word "bankruptcy" |
| Conventional loans |
48 |
|
24 |
48 |
|
|
FHA loans |
24 |
12 |
|
|
NOTE: Foreclosure, deed in lieu, or pre-foreclosure (short) sale rules also apply if any of these events took place.
FHA loans
A Chapter 7 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. Additionally, the borrower must have re-established good credit or chosen not to incur new credit obligations. The borrower also must have demonstrated a documented ability to responsibly manage his or her financial affairs.
An elapsed period of less than two years, but not less than 12 months, may be acceptable if the borrower can show that the bankruptcy was caused by extenuating circumstances beyond his or her control and has since exhibited a documented ability to manage his or her financial affairs in a responsible manner. Additionally, the lender must document that the borrower's current situation indicates that the events that led to the bankruptcy are not likely to recur.
A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage provided the lender documents that one year of the payout period under the bankruptcy has elapsed and the borrower's payment performance has been satisfactory (i.e., all required payments made on time). In addition, the borrower must receive permission from the court to enter into the mortgage transaction, if not discharges or dismissed.
FHA Exception policy: An elapsed period of less than two years, but not less than 12 months, may be acceptable for an FHA-insured mortgage, if the borrower can show that the bankruptcy was caused by extenuating circumstances beyond his/her control such as serious illness or death of the primary wage earner. Divorce is not considered an extenuating circumstance.
Conventional loans
Conventional loans area available 4 years following bankruptcy. FHA is clearly preferred.
Compensating factors and loan advocacy
The best possible re-built credit, compensating factors, and good loan advocacy are critical. Contact me ASAP!