How Soon Can You Buy a House after Bankruptcy
Going back to normal life after your bankruptcy will take some time. Financial worries and considerations about the aftermath of the discharge could keep you from doing the things youa��ve been dreaming about.A�Getting a new house a�� is that a good idea? How long should you wait to buy a house after bankruptcy?
The Waiting Period
In the past, people were often forced to wait until the bankruptcy disappeared from their credit report in order to qualify for the purchase of a house. Today, things arena��t as difficult as they used to be.
The average waiting period today (as far as qualifying for a mortgage goes) has been reduced to two years following the bankruptcy discharge. Under certain circumstances, people have been known to qualify for the purchase even faster than that.
The Waiting Period is Dependent on the Mortgage Type
The US market features several kinds of mortgage loans. Qualifying for each one after the bankruptcy filing will come with specific terms and conditions.
Federal Housing Authority (FHA) loans are the first option. The FHA loan is great for those who have very little upfront cash for the acquisition of a house. The credit score requirements arena��t highly restrictive (about 580 to 640 will do).
People who have completed a Chapter 7 bankruptcy discharge may qualify for the FHA loan within two years from the discharge. For those who have opted for a Chapter 13 bankruptcy, the waiting period will be one year after the final payment of the plan has been made.
Veterana��s Affairs (VA) loans are the second possibility. As the name suggests, such house purchase loans are available to provide financial assistance to veterans. This loan allows for the purchase of property without a down payment. There is also no minimum credit score requirement.
As far as waiting periods go, people who have gotten a Chapter 7 bankruptcy discharge will need to wait two years to qualify for the VA loan. Those who completed all of their Chapter 13 payments will have to wait 12 months to obtain their VA loan.
Conventional, commercially-available mortgages are third and probably the most widespread financing option as far as a house purchase is concerned. The federal government doesna��t have anything to do with such loans, which means that financial institutions can set their individual terms and conditions.
The waiting period for a conventional mortgage is the longest one. People who have gotten a Chapter 7 discharge will need to wait up to four years in order to qualify for a conventional mortgage. In the case of a Chapter 13 bankruptcy, the waiting period will be 24 months from the date of the last payment.
Additional Terms and Conditions
The terms mentioned above apply to individuals who have gone through the bankruptcy process without a foreclosure. Whenever a bankruptcy and a foreclosure occur, things may become more complicated as far as a home purchase goes.
People who go through a foreclosure will typically have to pass through a longer waiting period before qualifying for a loan. Things are complicated further by the fact that the bankruptcy does hit onea��s credit score.
Unless you qualify for one of the federal loans, a commercial mortgage will be the only possibility. Unfortunately, it is the one that comes with the longest waiting period. These mortgages, however, are the most affordable ones, which is why the wait may be justified.
Examine the available options and if possible, work towards rebuilding your credit score. Not only will such a strategy help you qualify for a better loan, you will also have a bigger number of options to choose among. This way, you can pick the most affordable loan and get your life back on track after the bankruptcy. Experienced bankruptcy attorneys can work with you to prepare a better ground while filing so that it is easier to buy a house after bankruptcy.