Bad times fall on all of us at some time or another. It is during those times we have to make some tough decisions. When debt becomes overwhelming, many find themselves filing bankruptcy to help relieve some of that debt. For an individual there are two types of bankruptcy-chapter 7 and chapter 13. Chapter 7 is allowed when the bankruptcy court determines based on income and other factors the individual cannot pay back the unsecured debt such as credit cards. In Chapter 13, the court determines what the individual can pay over a 3-5 year period in monthly payments to repay the debt. Which type of bankruptcy is filed is determined by many factors so this should be discussed with an attorney who is familiar with this type of law. But what happens after that? You may ask yourself if owning a home will ever be possible. The answer is YES! You cannot get a mortgage immediately after bankruptcy, but you can eventually get a loan. When you can get a mortgage after bankruptcy will depend upon the type of loan you want, the type of bankruptcy you filed, and how good your credit is at the time you want the loan.
FHA Loans and VA Loans
I order to obtain an FHA loan or a VA loan, both of which are government backed loans, after a Chapter 7 bankruptcy, you must wait two years from the date your Chapter 7 is discharged. An FHA loan is possible during a Chapter 13 bankruptcy as long as you have made 12 months of satisfactory Chapter 13 plan payments, but you must have bankruptcy court approval to get the loan. In the case of either an FHA loan or a VA loan, you must provide an explanation of the bankruptcy.
In order to qualify for USDA loan which is a popular no money down loan for buyers in rural areas, you must wait three years from the date of a Chapter 7 discharge or after 12 months of making Chapter 13 plan payments, with court approval, or at least one year after the Chapter 13 is discharged.
In order to apply for a conventional loan, you must wait four years after receiving a Chapter 7 discharge and two years after receiving a Chapter 13 discharge. If your Chapter 13 case was dismissed without a discharge, you must wait four years from the date of the dismissal.
When applying for a loan after bankruptcy, you still have to meet the minimum requirements of each type of loan as you would have if you had not filed bankruptcy. For more information on where to go for loans to purchase a home contact your agent and he or she can guide you in the right direction.