While declaring bankruptcy can negatively impact your credit score in the short term, you may still qualify for a mortgage loan. However, it will take some time and effort. How long a bankruptcy keeps showing up on your credit report depends on the type of bankruptcy filed. Chapter 7 bankruptcies remain on credit reports for as long as 10 years while Chapter 13 bankruptcies remain on credit reports for seven years.
Mortgage Options for Bankruptcy Filers
Unless you are a veteran or have a large amount of money to put down on a home (30% or more), you won’t be able to obtain a mortgage approval immediately after bankruptcy. Additionally, which kind of loan program you pursue will dictate how long you must wait.
- Fannie Mae and Freddie Mac (Conventional loans) will not accept mortgage applications from people who filed a chapter 7 bankruptcy until four years after discharge and two years after a chapter 13 was discharged.
- Federal Housing Administration (FHA) loans may shorten your waiting period to one year if you filed a chapter 13 or were forced to file bankruptcy due to losing your job. However, the FHA will expect you to show that you have found steady employment following bankruptcy. You must still wait two years after a chapter 7.
- Department of Veteran Affairs (VA) may give you a loan immediately after a chapter 13, but you will need to wait two years after a chapter 7 and provide evidence of re-established credit.
How to Improve Your Chances of Getting a Mortgage Loan after Bankruptcy
- Keep your new credit record spotless. Pay all bills on time and avoid racking up credit card debt. Also, check your credit record often to ensure it is accurate.
- Make a down payment. While down payments do not matter a great deal when applying for an FHA mortgage loan, applying with a decent down payment can only help your chances of getting approved for a mortgage after bankruptcy.
- Be honest and transparent. Get ready to answer questions regarding the circumstances of your bankruptcy. Lenders will ask what happened to make you file for bankruptcy, if you have established new credit, and whether you are currently behind in any of your bills—including utility bills. You will also be asked to provide all paperwork and court orders related to your bankruptcy.
Helpful Central Florida Mortgage Lenders
For over 25 years, Butler Mortgage has helped both seasoned and first-time buyers achieve Central Florida homeownership. If you’ve gone through bankruptcy, we can work with you to find the best loan solution to fit your needs. For more information about obtaining a mortgage after bankruptcy, contact Butler Mortgage today by calling 407-931-3800 or by filling out our free consultation form online.