Don’t let A chapter 7 bankruptcy stop you from getting a home mortgage! Yes, I know, I worked for big banks (who taught us that 7 years waiting was the absolute “law”), little banks (scared of any “b” word), and now I have finally been properly informed, so I want to pass that on to you.
There are 2-4 options (depending on how you count them):
- Just 1 day out of bankruptcy discharge – this is a bit of a catch22. These lenders require rebuilt credit (a decent credit score), reserves (extra money or 2-6 months of payments left over after you make your down payment), and a large down payment (15% minimum for the best credit scores and it goes up to the 35% range from there). Good news, you can get a gift from family for the down payment, but the reserves have to be yours.
- Just 2 years from bankruptcy discharge – plan ahead, because this is a great plan. FHA and VA allows 2 years after discharge! A good idea is to rebuild credit (for score) and save up for down payment, closing costs, and reserves. But with 2 years, this is a great way to get back into a home with a normal down payment (as low as 3.5% or 0% for VA) and a competitive “government loan” rate.
- Just 3 years from bankruptcy discharge – USDA rural housing allows 3 years from discharge and also up to 100% financing! Again, a competitive “government loan” rate. This is a great option.
- Just 4 years from bankruptcy discharge – conventional lending is available again, including both Fannie and Freddie’s programs for low to moderate income with down payment as low as 3%!
Life happens! Don’t let bankruptcy hold you back from getting back in the home loan game. Prepare ahead by saving money, rebuilding credit, and getting ready for 1 day to 4 years after discharge, and even better, lookup a lender with all the above options: