Can You Qualify For a Mortgage After Filing For Chapter 7 Bankruptcy?

Can You Qualify For a Mortgage After Filing For Chapter 7 Bankruptcy?

Is it right to apply for a home loan after filing chapter 7?

Filing for Chapter 7 bankruptcy can provide the financial relief you need after years of struggle. You can have all your unsecured debts, like your mounting credit card bills, discharged, leaving you with a fresh slate. You’ll have the money you need each month to take care of the basics, plus a little extra. You’ll also start rebuilding your credit, which has likely suffered from months or years of late payments or missed payments.

Some people worry that after they file for Chapter 7 bankruptcy, they won’t be able to move forward with other financial goals, like buying a home, because their credit will have a big black mark from which they cannot recover. While it is true that bankruptcy will be considered on your negative, it is not true that it will devastate your credit. In fact, it can help you recover more quickly, in many cases.

Is it right to apply for a home loan after filing chapter 7 in Gilbert, AZ

Know the Different Loan Options

There are different options for getting a mortgage, and the type of loan you are trying to get will determine how much time needs to pass after your bankruptcy discharge. A lender will look closely at your overall financial circumstances and credit history to determine whether to award you a loan. However, general guidelines for getting a mortgage loan after a bankruptcy are:

  • Federal Housing Administration (FHA) loans – two years
  • Department of Veteran Affairs (VA) loans – two years
  • U.S. Department of Agriculture (USDA) loans – three years
  • Conventional bank loans – four years

You will need to meet certain guidelines to qualify for one of these loans with a lower waiting period after filing for bankruptcy. For example, to qualify for a USDA loan, you have to buy a home in a rural area. Most bankers can arrange for these kinds of loans, so just talk to someone in the mortgage department at your bank to learn more about the qualifications for each.

how to Rebuild Your Credit

Even if the necessary amount of time has passed after your bankruptcy discharge, you won’t be able to be approved for a home loan if your credit is still bad. You need to take steps to rebuild your credit after your bankruptcy so that you can get approved for a loan and so you can get good terms, including a low interest rate.

Start out by paying all your bills on time and in full each month. Then, when you’re ready, apply for a small credit card with a gas station, department store, or other outlet. Keep the limit low, and spend frugally. Pay the bill on time each month. You’ll see your score start to rise steadily.

Keep a close eye on your balances for any credit cards you open or continue to maintain. The balance shouldn’t be more than 35 percent or so of the credit limit. Continue using credit responsibly and paying your bill on time, and you will see your credit score rise continually. The better your score is when you apply for a mortgage, the better your interest rates will be, which will save you significantly over time.

Filing for bankruptcy does not have to mean the end of your financial opportunities for the next seven years (the amount of time the bankruptcy remains on your credit report). In fact, filing for bankruptcy can open up many more financial opportunities for you because it frees you from debilitating debt. You can finally get your finances under control and use them to start meeting your goals, such as buying a new home. You just need to take the right steps to rebuild your credit after your bankruptcy, and you will be well on your way to creating the life you want.

hire a bankruptcy attorney in gilbert

Call Gilbert Bankruptcy Lawyers today to learn more about how filing for bankruptcy might help you get the debt relief you need so you can take back your finances. We represent clients seeking relief through both Chapter 7 bankruptcy and Chapter 13 bankruptcy. A bankruptcy attorney from our team will review your finances and talk with you about what you hope to achieve through bankruptcy to help you understand which choice would give you the most benefits. Contact us today to schedule a free consultation with one of our bankruptcy attorneys and learn more.

Gilbert Bankruptcy Lawyers
Office: 480-448-9800