Getting a Mortgage with a Bankruptcy

Can you get a mortgage if you filed bankruptcy and the bankruptcy is discharged?

4 Answers

Yes, you can get a mortgage with a BK on your credit.  However, there is going to be requirement for a certain time period (2-4 years) since the BK.  That is going to depend on several factors including what loan program you are using (FHA or conventional) and what kind of BK you had (Chapter 7 or 13). 

Also, you will have had to re-establish good credit and had no other hiccups on your credit since the discharge.  My best suggestion for you at this point is to get with a loan officer that has experience working with people with past credit issues and look at your credit report together to determine the best course of action and the timing on when you will be able to purchase a new home.   

Many many people get mortgages after  completing a bankruptcy. How soon you are able to depends on a few things.

What was your credit history prior to filing bankruptcy? You'd be surprised--often it's not the bankruptcy filing itself that trashes a credit score but the missed payments, judgments, and collections leading up to the filing. If you pay your bills right up until the day you file, the repurcussions are much less damaging.

What kind of filing did you choose? ****Chapter 13 filers are often treated differently than Chapter 7 filers, because Chapter 13 filers repay some or all of their debts while Chapter 7 filers may get a complete walkaway. Often lenders allow Chapter 13 filers to get mortgages a year or two sooner than Chapter 7 filers.

What caused you to file bankruptcy? People who file bankruptcy because they lost a job, endured the death of a spouse, suffered through severe illness, or went through other crises beyond their control are treated differently--it's referred to as "mitigating circumstances" in mortgage underwriting. But those who took one too many expensive vacations or found they couldn't make the payments on the McMansion, boat, motor home, and 4 cars when business got a little slow will be looked at more harshly. For example, FHA will write you a mortgage 12 months after discharging a bankruptcy if you have the right mitigating circumstances and have resolved your problems. Everyone else has to go at least another year and probably longer.

How have you handled your finances since the bankruptcy? ****This is the time to demonstrate that you've really learned your lesson. Pay EVERYTHING on time. Use credit only for small purchases and don't carry balances on your cards. If you choose to stay out of trouble by avoiding credit, that's okay. FHA guidelines state that you can choose NOT to reestablish a credit history if that's you're way of managing your budget. And it won't be held against you.

Make sure it won't happen again. ****Establish an emergency fund, enough for several months' worth of expenses. Buy medical insurance if you don't have it. If you have credit accounts, never carry a balance--the amount of available credit you use really affects your credit scores. Be prepared to show lenders the actions you've taken to avoid financial mis-steps in the future.

You can absolutely obtain favorable mortgage financing with a bankruptcy on your credit record. As mentioned in the prior post the constraints are set forth by the type of loan you are looking to obtain. Agency loans (conventional) and Government backed loans such as FHA and VA carry stringent guidelines.

There are still plenty of lenders that have private portfolio guidelines where they do not adhere to the conditions set forth by Agency and Government loans.You will typically need to contact a mortgage broker to obtain a loan with the less stringent bankruptcy seasoning guidelines. While the terms won't be as good as an Agency or Government loan it opens a realm of possibilities for you if your bankruptcy was more recent (within the last 3 years).

I would suggest speaking with a reputable loan officer to determine if you qualify under the Agency or Government loan guides. If you do not, then speak with a broker and ask if they have options outside of the norm. If they don't then they're not set up or they're not aware of the options available to pass along to you the consumer.

I also think that you can get a mortgage loan still you have already filed for bankruptcy. There are some banks where you can get mortgage loan but you will have to follow all the eligibility criteria which they ask for. There are some money lenders from where you can get 12 month payday loans, which can also help you.