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Chapter 7 bankruptcy provides debtors with an effective way to start over financially. And although there are many benefits to chapter 7 bankruptcy, it can make it difficult to do certain things, such as purchase a new home. Fortunately, however, purchasing a home after bankruptcy is possible. In this article, we discuss buying a home after chapter 7 bankruptcy.
The Realities of Purchasing a Home After Bankruptcy
If you need to borrow money to purchase a home—as most people do—bankruptcy can make things difficult for you. In addition to the bankruptcy itself, your credit report will reflect a history of judgments, late payments, and collections—thereby affecting your ability to obtain a loan. Fortunately, however, the effect of your bankruptcy diminishes over time.
Timeline for Buying a House After Chapter 7 Bankruptcy
Depending on your lender, the type of mortgage you qualify for, and the cause of your bankruptcy, you may have to wait between one and four years to obtain a home loan after filing for bankruptcy. In addition, you will have to wait until your credit score has improved enough for you to qualify for a mortgage. Below is an overview of the post-bankruptcy waiting periods associated with different types of mortgages:
Conventional Mortgage: The waiting period to obtain a conventional mortgage following chapter 7 bankruptcy is four years. However, the waiting period is two years if you can prove that extenuating circumstances caused the bankruptcy.
FHA Mortgage: The waiting period to obtain an FHA mortgage after chapter 7 bankruptcy is two years. However, the waiting period can be as little as one year if you can prove the bankruptcy was the result of extenuating circumstances.
VA Mortgage: The Departments of Veterans Affairs requires borrowers to wait at least two years from the date of chapter 7 discharge before closing on a VA mortgage. It may be possible to obtain a VA mortgage before the two-year mark, however, if you can demonstrate that extenuating circumstances were the cause of your bankruptcy.
USDA Mortgage: Finally, to obtain a USDA loan, lenders are required to carefully review the application of anyone who has a chapter 7 bankruptcy that was discharged less than three years prior to the application. As with the loans discussed above, however, extenuating circumstances may reduce this waiting period.
Contact a Chapter 7 Bankruptcy Attorney
If you are interested in exploring your bankruptcy options, you need an experienced chapter 7 bankruptcy attorney on your side. At Toronjo & Prosser Law, our experienced and knowledgeable bankruptcy attorneys will provide you with the personal attention you deserve. Unlike many larger firms, when you come to us for assistance, you will work with an experienced bankruptcy attorney immediately. With thousands of bankruptcy cases under our belts, our lawyers are qualified to handle your case in an effective and efficient manner. Please contact us today to schedule a free consultation.