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How To Qualify for a Mortgage After Chapter 7 Bankruptcy

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You have made it through Chapter 7 bankruptcy. Congratulations! You discharged your debt and have as clean a slate as you can get. Now, you want to move on with your new financial life – perhaps even buy a home. But how do you qualify for a mortgage loan after Chapter 7 bankruptcy?

Despite what many people assume, your dream of becoming a homeowner does not have to die when you go through Chapter 7 bankruptcy. Bankruptcy is a perfectly legal and acceptable way to discharge debts, so it should not prevent you from qualifying for a mortgage loan.

However, your Chapter 7 bankruptcy case may affect or delay your eligibility for a mortgage loan. For more information, keep reading and work with the experienced bankruptcy lawyers at Luftman, Heck & Associates. We can make sure your bankruptcy goes smoothly, so you’re in the best position after your discharge. Free consults are available at LHA: (216) 586-6600.

Rebuilding Your Credit

If you want to get a mortgage after filing for bankruptcy, one of the most important things you can do is take concrete steps to rebuild your credit. Bankruptcy and the events that often lead up to it can hurt your credit score. Now that you are on the other side of bankruptcy, you have to build that score back up.

One of the fastest ways to rebuild your credit after Chapter 7 is to get new credit lines and pay them off in full every month. You might be able to get a second credit card, a secured card that functions like a debit card but gets reported to the credit agencies, or a personal loan.

Paying any of these lines of credit off on time shows that you are responsible for your debts, which will increase your score. And the higher your credit score is, the more likely it is that you will get favorable terms for your mortgage loan or even get the loan at all.
Keep in mind that you should not get lines of credit that you will not be able to pay off; this will further harm your credit.

Post-Bankruptcy Mortgages

Each type of mortgage loan that you can get after Chapter 7 bankruptcy will have different requirements. Below, we look at the most common types of mortgage loans and how to qualify after Chapter 7 bankruptcy.

FHA Loans

The Federal Housing Administration insures FHA mortgage loans. Your Chapter 7 bankruptcy must have been discharged at least two years prior for you to qualify.

VA Loans

The Department of Veteran Affairs offers these loans to United States Military veterans. You must wait two years after Chapter 7 bankruptcy to apply and meet one of the following additional qualifications:

  • You served at least 181 days during peacetime
  • You served at least 90 days during wartime
  • You served for at least six years in the National Guard

USDA Loans

The United States Department of Agriculture offers USDA mortgage loans to those looking to buy property in a rural area. You will not be eligible for this kind of mortgage loan until three years after your Chapter 7 bankruptcy has been discharged.

Conventional Loans

Unlike the other mortgage loans described, a conventional mortgage is not backed by a government agency. The baseline waiting period for a traditional mortgage loan after a Chapter 7 bankruptcy discharge is four years. However, many non-government lenders have their waiting period requirements.

Legal Help After Chapter 7 Bankruptcy

The unique details of your case will determine which type of post-bankruptcy mortgage is right for you. Although it is possible to qualify for a mortgage loan after Chapter 7 bankruptcy, you will likely face some significant roadblocks as you pursue this dream. That is where an experienced Ohio bankruptcy lawyer from Luftman, Heck & Associates comes in.

To get started, contact us by calling (216) 586-6600 or reach out online.