You may believe that filing for bankruptcy will prevent you from ever qualifying for a mortgage. Fortunately, this is not the case; obtaining a mortgage after bankruptcy is possible. If you have filed for Chapter 7 or Chapter 13 bankruptcy, you may be able to obtain a mortgage after a certain waiting period.
To determine how your particular bankruptcy case will affect your ability to buy a house, it is in your best interest to contact Luftman, Heck & Associates at (216) 586-6600 to speak to an experienced Ohio bankruptcy lawyer who can assist you with your life after bankruptcy.
The Importance of Reestablishing Credit
If you would like a mortgage after bankruptcy, you need to understand the importance of reestablishing credit. By building up your credit, you’ll increase your chances of getting approved for a mortgage. You can begin building up your credit by paying off a secured credit card in full every month.
A secured credit card will function as a debit card but allow your activity to be reported to the three major credit reporting agencies every month. Once you’ve built up your credit with a secured credit card, you’ll want to focus on demonstrating responsibility across several credit lines.
You can get an unsecured credit card, car loan, or a personal loan and show that you are a responsible borrower with diverse credit streams. It’s important to refrain from multiple credit lines if your budget does not allow you to make payments in full.
Qualifying for Mortgage Loans After Bankruptcy
The waiting period for securing a mortgage loan will depend on the type of loan you’d like and type of bankruptcy for which you filed. Here is a brief overview of the waiting periods for the various types of home loans available:
- Conventional Loans- A conventional loan is a mortgage that is not insured or made by a government entity. Conventional loans are the most difficult to get after filing for bankruptcy. If you’ve been discharged from Chapter 7 bankruptcy, your wait period will be four years. Following a Chapter 13 bankruptcy discharge, you’ll be required to wait two years. Individual lenders sometimes have different waiting periods.
- FHA Loans- An FHA mortgage loan is insured by the Federal Housing Administration. If you’re interested in getting a mortgage after bankruptcy, an FHA loan is a smart option. In order to get approved for one after a Chapter 7 bankruptcy, your bankruptcy must be discharged for two years before you apply. If your bankruptcy is a Chapter 13, you can apply for an FHA loan if it was discharged a year before.
- VA Loans- VA loans are sponsored by the Department of Veteran Affairs and only available to veterans who have served a minimum of 181 days of service during peacetime, 90 days of service during war time, or six years of service in the National Guard. To qualify for a VA loan, your bankruptcy case must be dismissed for two years before you apply. If you filed for Chapter 13 bankruptcy, you won’t have to wait and can apply for a VA loan as soon as your bankruptcy has been discharged.
- USDA Loans- If the property you’d like to buy is in a rural area, you may be eligible for a loan from the United States Department of Agriculture or USDA. After three years of receiving a discharge for a Chapter 7 bankruptcy, you can obtain a USDA loan. For a USDA loan after a Chapter 13 bankruptcy discharge, you will need to wait a year. The court may also approve a USDA loan during a Chapter 13 bankruptcy.
Securing a Mortgage After Foreclosure
Often times, a foreclosure leads to bankruptcy. If you cannot keep up with your mortgage payments, the bank will eventually foreclose your property. Your home may be sold at a sheriff’s sale for less than you owe and you’ll be responsible for paying for the remaining loan amount. If you cannot pay the remaining loan amount, you may need to file for bankruptcy to discharge the money you owe.
If you are forced to file for bankruptcy following a foreclosure, know that you may still qualify for another mortgage in the future. In most cases recovering from foreclosure and getting approved for another mortgage can take seven years. However, each lender has different time frames in which it will reconsider someone who has filed for bankruptcy.
If your foreclosure occurred prior to your bankruptcy, your waiting period will start the day of your discharge. In the event that your foreclosure took place following your bankruptcy, your bankruptcy discharge date rather than your foreclosure date will be used.
Why Hire an Ohio Bankruptcy Lawyer
Although it will take some time and dedication to repair your credit, you can get a mortgage after a bankruptcy and/or foreclosure. An Ohio bankruptcy lawyer from Luftman, Heck & Associates can review your situation and let you know which type of mortgage loan is right for you. They can also guide you the process of rebuilding your credit and make sure you are being treated fairly by mortgage lenders.
Bankruptcy can allow you to eliminate overwhelming amounts of debt without compromising your future as a homeowner. For more information on how you can get a mortgage after bankruptcy and/or foreclosure, we encourage you to call us today at (216) 586-6600, or contact us online for a free consultation.