Dear Gina: How Soon After Bankruptcy Discharge Can I Get a Mortgage?
By Gina PogolMortgage Credit Problems Columnist
Terri P. asks: How long after a bankruptcy discharge do you recommend someone wait to apply for a mortgage?
Gina's answer: That depends on how bad your credit was, what caused you to file for bankruptcy, and what kind of filing you did. A solid citizen who became seriously ill, racked up huge medical bills, and was unable to work is looked at differently than a party animal who bought one too many boats and "invested" excessively at the craps tables.
FHA, probably the most forgiving program available today, allows you to obtain a mortgage if at least two years have elapsed since discharge of a Chapter 7 bankruptcy. But you may be eligible for a loan after only 12 months if your bankruptcy was caused by extenuating circumstances beyond your control. You must also show that you are managing your finances responsibly (no late payments!) and that the events that led to the bankruptcy are not likely to recur. For example, if your bankruptcy was caused by a gambling, drug-addicted spouse, you could provide your divorce decree, invoices for lock-changing, and the vet bills for your new guard dog.
A Chapter 13 bankruptcy need not keep you from getting an FHA mortgage if one year of the payout period under the bankruptcy has elapsed and you have made all of your payments on time. You must also get permission from the court to obtain a new mortgage.
Your behavior after filing bankruptcy is critical. FHA guidelines state, "A period of financial difficulty in the past does not necessarily make the risk unacceptable if the borrower has maintained a good payment record for a considerable time period since the difficulty." This doesn't mean you have to go get a bunch of credit cards to reestablish credit. FHA recognizes that for many people, refraining from using consumer credit is a smart decision and responsible financial management. Keep your nose clean--if you thought bad credit before filing bankruptcy made your life difficult, bad credit after a bankruptcy can make it impossible.
Finally, your overall picture must be good. Your income must be adequate to support your proposed mortgage payment. It helps if you have a stable job, and if you can demonstrate that you have paid your bills responsibly, not bounced checks, and saved some money for your down payment. Even better, get a couple of month's of expenses in the bank so you have an emergency fund.
Bad credit and bankruptcy doesn't make you a bad person, or even necessarily a bad credit risk. It's what you do after your discharge that affects your ability to get a new mortgage and get on with your life.
About the Author
Gina Pogol has over a decade of mortgage lending experience, in addition to practice as a paralegal for a bankruptcy attorney, and as a business credit consultant for Experian. She is also certified to underwrite Fannie Mae loans. She earned her BS in Financial Management from the University of Nevada.
All information provided “as is” for informational purposes only, and is not financial advice. MortgageCreditProblems.com, its affiliates, and any of the independent providers of information on this site shall have no liability for any informational errors or incompleteness, or for any actions taken in reliance on information contained herein.
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