How to Get a Conventional Loan After Chapter 7 Bankruptcy

How soon can you get a conventional loan after Chapter 7 bankruptcy? Which loan is best?

Chapter 7 bankruptcy graphicA lot of people are often surprised to learn that their credit can actually improve after they file for Chapter 7 bankruptcy. This means that it’s actually possible to get a good home loan.

Buying a house after bankruptcy is a daunting task, but there are a few things you need to know to get started. I'll show you how to do it.

The fact is, filing for bankruptcy does not leave a lasting stain on your credit history. It is even feasible to purchase a property after declaring bankruptcy. Buying a property after being declared bankrupt is the subject of this article.

How soon after bankruptcy can you buy a house? 

In most cases, you will have to wait at least two to four years to get a mortgage, so it is wise to wait until your credit score has improved before applying for a mortgage.

Can I Buy a House 1 Year After Chapter 7 Discharge?

In most circumstances, you will have to wait at least two years after your Chapter 7 bankruptcy is completed before you can be accepted for a home loan.

However, it may be possible to obtain a mortgage after only one year, if your bankruptcy was caused by extenuating circumstances beyond your control, and you have demonstrated an ability to handle your financial affairs properly since filing for bankruptcy.

In the case of a significant sickness, medical expenditures incurred as a result of the disease, or an extended period of unemployment or income decrease, such mitigating circumstances may apply.

Take note that each loan program has its own set of standards regarding what events in one's life qualify as an extenuating circumstance in order to qualify for a loan.Speak to a loan officer to see if you meet a bankruptcy exception.

Conventional Loan and Chapter 7 Bankruptcy

If you're struggling to pay your bills and you're not able to get any relief from your creditor(s), a Chapter 7 bankruptcy is a great choice. A Chapter 7 bankruptcy is not the answer for everyone. Before you make a decision on whether this option is right for you, you should speak with a bankruptcy attorney.

After you have discharged your debts through the bankruptcy process, you should examine the possibility of purchasing a house. The purchase of a home is an excellent method to begin the process of restoring your financial condition, and it may also provide you with a feeling of achievement.

On the other hand, even after being released from bankruptcy, you could have to wait longer before you can purchase a home. A typical loan has a waiting period of four years attached to it.

Conventional Loan and Chapter 13 Bankruptcy

Chapter 13 bankruptcy graphicChapter 13 is considered to be a “reorganization” of your debts rather than a “wipe out” like a Chapter 7 bankruptcy. While a Chapter 7 bankruptcy wipes away all your debts, Chapter 13 is a reorganization. Reorganization allows you to make payments to your creditors instead of paying them in full, while keeping the rest of your assets.

There are different waiting periods that apply to a conventional loan depending on whether your case was dismissed or discharged. The waiting period is based on the type of loan you want to get, the type of property you want to buy, and how much equity you have in your home.

If you're thinking about getting a mortgage, make sure you know all the rules and regulations surrounding it. Some banks will require you to wait one year after a Chapter 13 bankruptcy, and some will waive this requirement. Also, make sure you understand what happens if you get a discharge or dismissal in your case.

Take the First Step to Repair Your Credit

Your credit score is a three-digit number that indicates how likely you are to repay your debts. The higher your score, the easier it is for lenders to approve your loan. Reestablishing your credit after a bankruptcy is a good idea. However, if you haven't been paying bills on time, it might be difficult to get a new credit card.

Secured credit cards are a great way to get back on your feet. You can get a secured credit card with a low interest rate and a high limit. This allows you to start building your credit again, while paying down your debt at the same time.

Even if you have a poor credit score, you can obtain a secured credit card, even if you have filed for bankruptcy. Why? Because a bankruptcy will appear on your credit report for ten years, it will have a negative impact on your credit score. If you filed for bankruptcy more than three years ago and have been paying payments on time since then, your bankruptcy will remain on your record.

A Chapter 13 bankruptcy will be on your credit report for 7 years.

If you are in a position where you have some amount of debt, it is important that you pay it off. Debt is not only a financial burden, but it can also have a negative impact on your credit score. By making sure that you have paid your bills on time, you will be doing a lot to improve your credit score.

When you open up your monthly statement, you may see an automatic deduction for your loan or credit card. This is called an auto-pay feature. It's a way to make sure that you don't forget to make your payments, and it can save you money if you set it up properly. It's also a good idea to check your statements and payments at least once a month.

Letter of Explanation for a Bankruptcy

It's important to explain what happened in your financial situation and why you have a bankruptcy on your credit report. If you're applying for a home loan, you want to be able to show that the past financial problems are behind you.

When you file for bankruptcy, it is very important that you provide a detailed explanation of what led to the filing, how your financial situation has changed since then, and what steps you have taken to improve your finances.

A letter of explanation is not a form that you have to fill out, but rather, it is a letter that you can write in response to a request from your lender.

If you are looking for a home loan, you may need to provide additional information that lenders have requested. If you are planning to refinance your existing mortgage, include a copy of your explanation letter with your mortgage application.

Which Mortgage is Best After Bankruptcy


Conventional Loan

Fannie Mae and Freddie Mac graphicUnfortunately, if you try to secure a conventional loan after filing for bankruptcy, you'll have to wait a bit longer than you'd want. An individual's Chapter 7 bankruptcy must be dismissed or discharged four years before applying for a conventional loan.

When applying for a conventional loan after filing for Chapter 13 bankruptcy, you must wait four years from the date of filing and two years from the date of discharge before you may apply for another conventional loan.

If you find yourself in this situation, bear in mind that conventional loans have stricter credit requirements, which is why some post-bankruptcy applicants seek out loans through the FHA, VA, USDA, or other government-backed lending programs.

FHA Loan

FHA logoThe Federal Housing Administration insures mortgages against loss due to default and acts as a guarantor of mortgage payments. If you have a FHA mortgage, you can count on a low interest rate. The FHA loan is a solid option for those who want to buy a home post bankruptcy. The waiting period for an FHA loan is two years from the discharge date.
Learn more at FHALoanPlus

VA Loan

VA logoThe VA loan program was created to help military veterans and their families buy a home. When a veteran is discharged from active duty, he or she has the option to apply for a VA loan.

The VA offers an array of home loan programs, including fixed-rate and adjustable-rate mortgages. The loan is available to current and former members of the U.S. military, reservists, National Guard members, and honorably discharged veterans of the U.S. Armed Forces. The waiting period for a VA loan is two years from the discharge date. Learn more at VALoanPlus

USDA Loan

USDA logoIf you are applying for a USDA loan and had a chapter 7 bankruptcy that was dismissed less than three years ago, lenders are obligated to conduct a more thorough review of your application.

If your bankruptcy was caused by exceptional circumstances that have since been handled and you have restored strong credit, you may be able to qualify for a loan sooner than you would otherwise.

The waiting period for a USDA loan is  is three years from the discharge date.
Learn more at USDALoanPlus

Rotating question markFrequently Asked Questions: Obtaining a Mortgage After Filing for Bankruptcy

Q. Is it possible to get rid of my mortgage debt through bankruptcy?

Chapter 7 bankruptcy will almost certainly remove your mortgage debt, but it will also require you to give up your house unless it qualifies for an exemption from the bankruptcy court. In order to recoup as much of the initial mortgage amount as possible, your lender retains the right to foreclose on the property.

You may be allowed to keep assets such as your home if you file for Chapter 13 bankruptcy. To repay your loan, you'll have to come up with a fresh strategy. To avoid foreclosure, just make sure you pay your bills on time. Otherwise, you may find yourself in financial trouble.

Bankruptcy is an option for homeowners who owe more than their homes are worth. This is a complex topic, and there are many things to consider when deciding if bankruptcy is right for you.

If you have fallen behind on your mortgage or you owe more than your home is worth, you may be facing a Chapter 13 bankruptcy. You may be able to keep your home if you have a plan to pay back the money you owe.

Q. What happens to a second mortgage when a person files for bankruptcy?

Your second mortgage is most likely one of the most substantial financial commitments you have made in your life to date.

You must fully comprehend what will happen to your second mortgage if you file for bankruptcy before beginning with the procedure. In the case of a Chapter 7 bankruptcy petition, it is unlikely that your second mortgage will be discharged in its whole.

For those who file for bankruptcy under Chapter 13 of the United States bankruptcy legislation, it may be possible to have the second mortgage lien discharged.

Assuming the bankruptcy court grants your motion, you will only be needed to make monthly payments to a bankruptcy trustee, which is usually not a significant strain on your financial situation.

If you have a mortgage on your home, you probably have a second mortgage too. When you pay off your second mortgage, you have the opportunity to have the debt from the second mortgage discharged.

However, if your second mortgage is underwater, that is, the balance of your second mortgage is greater than your home's value, then you may be eligible for a second mortgage debt discharge.

In order to obtain a mortgage after filing for bankruptcy, are there any exceptions to the waiting period?

You can have an exception to the waiting period for a mortgage after bankruptcy. However, your lender may not be able to grant this exception if you have missed payments on your mortgage. This means that you will have to make up those missed payments.

Q. What is the difference between the date of bankruptcy filing and the date of bankruptcy discharge?

The date you file for bankruptcy is called the “filing date.” The date that you're discharged from all of your debts is called the “discharge date.

Chapter 13 bankruptcy is a way to restructure your debt and keep your assets. You can use your Chapter 13 plan to pay back all or a portion of your debts. It's important to know that the amount of money you can get back from a Chapter 13 plan is limited.

In order to obtain a mortgage after filing for bankruptcy, are there any exceptions to the waiting period?

You must wait six months from the date of discharge, or the end of the bankruptcy proceeding. During this period, you may still be required to pay back some or all of the money you borrowed.

Conclusion

In conclusion, if you are seeking a conventional loan after Chapter 7 bankruptcy, there are a few things you can do to improve your chances of being approved. First, make sure that you have been discharged from bankruptcy for at least two years. Next, make sure that you have re-established good credit by paying your bills on time and maintaining a good credit score. Finally, be prepared to provide documentation proving that you are now in a healthy financial position.