How Soon Can I Buy A House After Bankruptcy

Bankruptcy is a legal process allowing individuals to have their debts forgiven or reorganized to get a fresh financial start. While bankruptcy can provide much-needed relief for those struggling with overwhelming debt, it can also significantly impact a person's credit score and ability to borrow money or purchase property in the future. If you are considering bankruptcy or have recently filed for bankruptcy, you may wonder how soon you can buy a house after bankruptcy.

This article will explore the factors that can affect your ability to buy a house after bankruptcy and discuss the various loan options available to those who have gone through bankruptcy.

Factors that Affect How Soon You Can Buy a House After Bankruptcy

Several factors can affect how soon you can buy a house after bankruptcy, including the type of bankruptcy you filed, the length of time since the bankruptcy was filed, and your credit score and credit history.

Type of Bankruptcy

One of the first things to consider when determining how soon you can buy a house after bankruptcy is the type of bankruptcy you filed. Suppose you filed for Chapter 7 bankruptcy, which is a liquidation bankruptcy. In that case, it may take longer to buy a home than if you filed for Chapter 13 bankruptcy, which is a reorganization bankruptcy.

This is because Chapter 7 bankruptcy involves the sale of your non-exempt assets to pay off your debts, while Chapter 13 bankruptcy involves creating a repayment plan to pay off your debts over three to five years. As a result, Chapter 13 bankruptcy may have a shorter impact on your credit score and ability to borrow money than Chapter 7 bankruptcy.

Length of Time Since Bankruptcy was Filed

Another factor affecting how soon you can buy a house after bankruptcy is the length of time since you filed for bankruptcy. Generally, the longer it has been since you filed for bankruptcy, the more likely you will be approved for a mortgage. This is because your credit score will have had more time to recover, and your financial situation will have had more time to improve.

Credit Score and Credit History

Your credit score and credit history are important factors that lenders consider when determining whether to approve you for a mortgage. If you have a low credit score or a limited credit history, you may have a harder time getting approved for a mortgage after bankruptcy. On the other hand, if you have a good credit score and a strong credit history, you may have an easier time getting approved.

Loan Options for Buying a House After Bankruptcy

There are several loan options available to those who have gone through bankruptcy, including FHA loans, VA loans, USDA loans, and conventional loans with a higher down payment. Let's take a look at each type in more detail.

FHA Loans

Federal Housing Administration (FHA) loans are a popular option for borrowers who have gone through bankruptcy. To qualify for an FHA loan, you must wait at least two years after filing for Chapter 7 bankruptcy and at least one year after filing for Chapter 13 bankruptcy.

FHA loans are backed by the government and have more flexible credit requirements compared to conventional loans. However, they require a down payment of at least 3.5% and may have higher mortgage insurance premiums.

VA Loans

If you are a veteran or active duty military member, you may be able to qualify for a VA loan after bankruptcy. VA loans are backed by the Department of Veterans Affairs and have more lenient credit requirements compared to conventional loans.

In order to qualify for a VA loan after bankruptcy, you must typically wait at least two years after filing for Chapter 7 bankruptcy and at least one year after filing for Chapter 13 bankruptcy. VA loans do not require a downpayment and have lower mortgage insurance premiums compared to FHA loans.

USDA Loans

United States Department of Agriculture (USDA) loans are another option for borrowers who have gone through bankruptcy. USDA loans are available to low- and moderate-income borrowers who are looking to buy a home in a rural or suburban area.

To qualify for a USDA loan after bankruptcy, you must typically wait at least three years after filing for Chapter 7 bankruptcy and at least two years after filing for Chapter 13 bankruptcy. USDA loans do not require a downpayment and have lower mortgage insurance premiums compared to FHA loans.

Conventional Loans with Higher Down Payment

If you have a higher credit score and a larger down payment, you may be able to qualify for a conventional loan after bankruptcy. Conventional loans are not backed by the government and have stricter credit requirements compared to FHA and VA loans.

However, they may have lower mortgage insurance premiums and offer more flexible terms. In order to qualify for a conventional loan after bankruptcy, you may need to wait at least four years after filing for Chapter 7 bankruptcy and at least two years after filing for Chapter 13 bankruptcy.

Closing Thoughts

In conclusion, while bankruptcy can make it more difficult to buy a house, it is still possible to do so with some planning and effort. By rebuilding your credit, saving for a down payment, and working with a lender or mortgage broker who understands your situation, you can increase your chances of being approved for a mortgage and achieve your goal of homeownership.

If you are interested in buying a house in the St. Louis area, we encourage you to contact us at the Chad Wilson Group for all of your home-buying needs using the Contact Us form below. Our team of experienced professionals can help you navigate the process of buying a house after bankruptcy and find the right loan option for you.