How soon can you get a mortgage after emerging from Chapter 7?

When people who have filed for Chapter 7 bankruptcy get their financial life back on track, many consider the possibility of buying a home. It is possible to get a mortgage after a Chapter 7 bankruptcy. However, you may have to do some searching to find a lender willing to accommodate you. You also need to be patient, as lenders have varying requirements for how soon they’ll approve a mortgage after a bankruptcy has been discharged.

People who filed Chapter 7 rather than Chapter 13 generally have to wait longer to qualify for a mortgage, since the former is a liquidation of debt, while the latter is a reorganization. However, if your Chapter 7 filing was due to extenuating circumstances, such as a job loss, significant medical bills or some other sudden or unforeseen event, that may cut your wait time for mortgage approval.

Fortunately, the government has implemented new guidelines along with a number of programs designed to help potential home buyers qualify for a mortgage. One of these is the Back to Work program. This Federal Housing Administration program enables some buyers to qualify for a mortgage just a year after emerging from bankruptcy.

If you don’t qualify for the Back to Work program, FHA loans are still generally the most accessible for people with a Chapter 7 in their past. People who have re-established good credit and haven’t taken on additional credit may be able to qualify for an FHA loan in two years.

People who are eligible for VA home loans may be able to qualify for one in two years or even less after a bankruptcy, provided that they have since re-established good credit. Business owners who were thrust into bankruptcy after their business failed may also be able qualify for a VA home loan within less than two years.

Conventional loans through Fannie Mae or Freddie Mac generally require a four-year wait. However, if there were extenuating circumstances, that wait time can be cut in half.

With home loan rates hovering in the 3 percent range, many people who thought than home ownership was a distant dream may be able to afford a home sooner than they thought. If you’re concerned about how your Chapter 7 bankruptcy will affect your ability to qualify for a mortgage, an experienced New York bankruptcy attorney can provide information and guidance.

Source: The Mortgage Reports, “With Rates In The 3s, Post-Bankruptcy Applicants Are Asking When They Can Buy Again,” Gina Pogol, accessed Aug. 31, 2016