Can You Buy a Home After Bankruptcy?

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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Bankruptcy can have lasting negative effects on your finances and can feel impossible to bounce back from. But if you want to buy a home and a bankruptcy filing is still lingering on your credit report, you may not be completely out of luck. 

Some lenders have mortgage solutions that may be available to you, even if it’s only been one or two years. But, again, it depends on the type of bankruptcy filed and the loan program you select. 

Traditional and NQ Mortgage Loans

 
Are you looking to finance a home too expensive for a conventional loan? An Angel Oak Jumbo Loan can provide financing for up to $3.5 million.

How Does Bankruptcy Affect Your Mortgage?

If the bankruptcy is only a few years old, chances are your credit score is on the lower end. Even if it’s high enough to qualify for a home loan, you could get a steep interest rate since the risk of default is higher. 

Is It Possible to Buy a Home After Bankruptcy?

In short, yes. However, the waiting period depends on the type of bankruptcy you filed and the home loan you’re pursuing. 

Chapter 7

You can get a mortgage between one and four years following the discharge or dismissal of a Chapter 7 bankruptcy filing. Again, it depends on the type of home loan you’re applying for. 

Chapter 13

There’s a bit more leniency with Chapter 13 bankruptcy filings. It’s possible to secure a mortgage as soon as one year, although most home loan products have a waiting period of two or four years. 

What Types of Mortgages Can You Get After Bankruptcy?

You may be eligible for a conventional loan or government-backed loan after bankruptcy. There are also non-conforming mortgage products available through private lenders, like Angel Oak Home Loans, that could be a good fit for you. More on those shortly. 

How Soon Can You Get a Home After Bankruptcy?

FHA Loans

  • Chapter 7 Bankruptcy: two years from the date of dismissal or discharge 
  • Chapter 13 Bankruptcy: no waiting period if the court has discharged or dismissed the bankruptcy 

VA Loans

  • Chapter 7 Bankruptcy: two years from the date of dismissal or discharge 
  • Chapter 13 Bankruptcy: no waiting period if the court has discharged or dismissed the bankruptcy 

USDA Loans

  • Chapter 7 Bankruptcy: three years from the date of dismissal or discharge 
  • Chapter 13 Bankruptcy: one-year waiting period (dismissals and discharges) 

Conventional Loans

  • Chapter 7 Bankruptcy: four years from the date of dismissal or discharge 
  • Chapter 13 Bankruptcy: four years from the date of dismissal (if your bankruptcy is dismissed) or four years from the filing date and two years from the date of dismissal (If your bankruptcy is discharged) 

Traditional and NQ Mortgage Loans

 
Are you looking to finance a home too expensive for a conventional loan? An Angel Oak Jumbo Loan can provide financing for up to $3.5 million.

Tips to Buy a Home After a Bankruptcy

Rebuild Your Credit and Monitor Your Credit Reports

When you filed for bankruptcy, your credit score likely took a huge hit. But it’s possible to start building it back up by adding positive payment history to your credit reports. You can also get a secured credit card to help you get back on track. You’ll need to make a security deposit, which is typically equivalent to the credit limit. But remember to make timely payments each month on or before the due date and keep the balance low to have the best shot at rebuilding your credit. 

Pay What You Owe on Time and Keep Your Debts to a Minimum

Payment history makes up 35 percent of the FICO credit-scoring model, which is used by 90 percent of creditors and lenders to make lending decisions. So, it’s vital to pay your bills on time. And if any accounts are past due, pay the delinquent balances as soon as possible or make arrangements with creditors to bring them current over time. 

It’s equally important to keep the balances on your revolving debts (or credit cards) low. Your credit utilization, or the amount of available credit in use, accounts for 30 percent of your FICO score. Ideally, you want to keep your utilization at or below 30 percent – 10 percent or lower is even better to help improve your credit score. Plus, a lower debt load equates to a lower debt-to-income (DTI) ratio, which could make it easier to qualify for a mortgage. 

Opt for a Non-QM Loan

Consider a Non-QM Loan that isn’t backed by the federal government, as they generally have more flexible qualification criteria. Angel Oak Home Loans, a full-service mortgage lender, offers a mortgage product that caters to borrowers with recent credit events. 

It’s called the Portfolio Select Home Loan and only requires a two-year waiting period following bankruptcy to be eligible for funding. Loan amounts range from $250,000 to $2.5 million. 

Inquire about this home loan product or others that may be available to you by completing the online form

Get Preapproved If You Can

Before formally applying, shop around to find reputable lenders. Once you have a short list, get preapproved to determine if you’re eligible for a mortgage and how much you qualify for. Doing so helps you compare home loan options to find the best fit. Plus, it makes your home search easier since you know how much the lender is willing to lend you, and it’s generally required when making an offer on a home in today’s competitive market. 

Include an Explanation in Writing

Draft up a letter explaining the circumstances surrounding your bankruptcy and how you’ve modified your behaviors or changed your financial situation to prevent history from repeating itself. A written explanation provides greater insight into your side of the story, and the underwriter may consider it when reviewing your application for a mortgage.

Angel Oak

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All data provided by the Home Mortgage Disclosure Act, at cfpb.gov updated Dec, 19
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