Can You Buy a Home After Filing Bankruptcy?

Buying a house as a first time home buyer comes with it's challenges. Let alone post bankruptcy filing. Bankruptcy is meant to help free you from certain debts to provide a fresh start. If you have filed for bankruptcy it is still possible to purchase a home regardless of whether you’ve filed for chapter 7 or chapter 13 bankruptcy.

Chances are you will have a lower credit score from your bankruptcy which may make for a mortgage payment with higher interest rates or purchase a less expensive home compared to someone with excellent credit. A small price to pay when you’re trying to get your finances back in shape.

Purchasing cash is always an option. Obtaining a mortgage for your home isn't out of the question either. A lender is more partial to someone with a record of positive repayment history and without being able to prove you can manage your financial situation this time around, lending guidelines require a mandatory waiting period.

First, let’s discuss the two most common types of consumer bankruptcy: chapter 7 and chapter 13. We’ll also show you how long you have to wait before you might qualify for certain common mortgage types.

For chapter 7 filing, to get a conventional mortgage you’ll typically have to wait four years from the bankruptcy discharge or dismissal before getting a mortgage. waiting period goes down to two years if you can document extenuating circumstances that caused your bankruptcy.

The U.S. Department of Housing and Urban Development (HUD) requires borrowers to wait two years from discharge of a chapter 7 bankruptcy before they can qualify for an FHA mortgage The waiting period can be as little as one year if you can document extenuating circumstances.

For a chapter 13 bankruptcy, you’ll have to wait two years after discharge or four years after a dismissal if your bankruptcy was caused by financial mismanagement. If you had extenuating circumstances, the waiting period is two years from the date of bankruptcy discharge or two years after a dismissal instead of four years.

HUD requires borrowers to wait at least 12 months from the beginning of the chapter 13 bankruptcy pay-out period before qualifying for a mortgage. HUD also requires borrowers to get written permission from the bankruptcy court to get a mortgage.

All in all, a bankruptcy for under any circumstances is a financial reset that doesn't eliminate your buying power as a homeowner. If you're ready to make the financial decision it could be the way back to having assets working for you.