Buy a New Home with a Bankruptcy on File

I want to buy a new home with a bankruptcy on file is it ok

3 Answers

This would depend on the type of bankruptcy that was filed.  You also need to show that you have restabished your credit since the bankruptcy.  What does restablish mean; you have new credit that you have opened and there have been no late payments as well as any type of degoratory reports on your credit report since your bankruptcy.

For an FHA and VA loan the guideline is that for a:

  • Chapter 7 bankruptcy you can try to qualify for a loan after 2 years

  • Chapter 13 bankruptcy after a year with court clerk approval

Under Fannie Mae guidelines it has to be 4 years however some banks may have their own guidelines that they add on top of that.  I have seen it that some banks under conventional lending not FHA lending which is a government loan want 5 years.

Freddie Mac bankruptcy guideline is that the bankruptcy has been full executed and complete; minimum credit score of 680, and that you have re-established positive credit which will mean a minimum of 12 months from date of discharge or dismissal. 

Banks/lender will require a written explaination of why you had to file bankruptcy as well as the full bankruptucy petition, schedule of debts, and/or discharge or dismissal. 

Remember thought, banks will over lay their own rules on top so make sure you check with the lender and their guidelines.  I know with Cherry Creek Mortgage we follow FHA guidelines but for conventional we have to follow the bank guideline so with some clients we have to go bank specific to get the loan done. 

CALL a Loan Professional in your area!

The answer depends upon several criteria- The type of bankruptcy, time elapsed since filing and/or satisfaction, and whether or not you have reestablished a good credit rating since filing or satisfaction. If you have not reestablished good credit, then the answer is NO.

If bankruptcy was a Chapter 7, then it must have been dismissed for 2 years for FHA loans and 4 years for Fannie Mae conventional loans. There are rare instances when an exception is made if the Bk. was caused by extenuating circumstances, which were uncontrollable by the borrower.

For FHA, a Chapter 13 bankruptcy on file must have been filed and a 12 month payment history must have been established with all payments having been on time. Permission to enter into the mortgage agreement must be granted by the court. 

Fannie Mae conventional rules covering a Chapter 13 Bk. require 2 years from date of discharge or 4 years if a dismaissal was recorded.

In all cases, even if the required time has elapsed, acceptable credit must have been restablished. Acceptable credit under most lender guidelines is a FICO score of 640, with a few allowing a 620, and even fewer allowing a 600 FICO for some government backed loans.

Unfortunately, this is too broad a question to answer without knowing more about your particular situation. Details such as your current income and savings, as well as teh type of bankruptcy you filed and the circumstances that made it necessary come into play. Some lenders will consider offering a mortgage to an applicant that is able to show at least 3-5 years of recovered credit (with NO further issues) and proven savings toward the down payment. Some may consider less time, especially if the bankruptcy was the result of a one-time life event (such as the death of a spouse) that is not likely to reoccur. Some, on the other hand, will require that you have 7-10 years pass before you are qualified to mortgage a home.

Speak to a qualified, trustworthy local lender or lenders about your credit and capacity to buy a home. They should be able to give you a timeline, and a list of tasks that you will need to complete in order to move forward financially. Best of luck!