A common question that people thinking about filing for bankruptcy have is, “Will I ever be able to take out a loan again?” Specifically, they worry that they will not get approved for a mortgage with a bankruptcy on their records. Will they be stuck in their current home for the rest of their lives? Or will they have to accept an outrageous interest rate?
The answer to both questions is no. It is true that filing for Chapter 7 bankruptcy remains on your credit report for ten years, and a Chapter 13 filing lasts on your record for seven. But you may be able to get a mortgage at a reasonable interest rate much sooner than that.
The waiting periods post-bankruptcy
For example, if you want to apply for an FHA-backed mortgage, you can qualify immediately if you went through Chapter 13 bankruptcy. In fact, as long as you are keeping up on your bankruptcy payments, you do not even need to wait until bankruptcy is finished to apply for an FHA loan. If you went through Chapter 7 instead, you would have to wait at least two years after you complete bankruptcy, and more likely, at least three.
For conventional mortgages backed by Freddie Mac, Fannie Mae or Ginnie Mae, the typical waiting period is two years from discharge and four years from dismissal for Chapter 13 filers. Chapter 7 filers usually must wait four years, but extenuating circumstances like a job layoff can shorten the waiting period to two years.
What it takes to buy your dream house after bankruptcy
Getting approval for a major loan like a mortgage can be challenging after bankruptcy, but far from impossible. One way you can help yourself during the waiting period is to pay your bills on time and otherwise work to re-establish that you are a good credit risk.
Another method to help you move on with your life as soon as possible is to retain an experienced bankruptcy attorney. A smart lawyer’s help will make sure bankruptcy does not affect your credit any more than necessary.