November 18, 2014
How long will it be until I can buy a house again? This is one of the first questions many people ask when filing for bankruptcy and/or after losing a house to foreclosure. The common misconception, often perpetuated by creditors, is that you will never be able to buy another house or that you will not be able to for ten years. This is just not true. New programs allow debtors to purchase a home much faster than they usually think is possible.
The mandatory waiting periods to apply for mortgages backed by Fannie Mae, United States Department of Agriculture (“USDA”), or the Federal Housing Administration (“FHA”) is between one and four years depending on your situation and the type of loan you apply for.
Conventional loans backed by Fannie Mae backed loans have a longer waiting period than those backed by the FHA. Individuals who receive a discharge in a Chapter 7 bankruptcy have to wait four years from their discharge date. Those who filed Chapter 13 bankruptcy have a two year waiting period from the date of discharge. If your Chapter 13 bankruptcy was dismissed you must wait four years from the date of dismissal.
USDA loans carry a three year waiting period for a Chapter 7 discharge. During a Chapter 13, you can receive a USDA loan as quickly as 12 months after filing. You must have both court approval and evidence 12 consecutive Chapter 13 Plan payments. You are also eligible for a USDA loan one year after your Chapter 13 discharge.
The FHA’s new programs may offer the best possible solution for those who have filed for bankruptcy or lost their home to foreclosure. The FHA’s Back to Work – Extenuating Circumstances program allows borrowers to qualify for a new FHA loan just one year after a foreclosure, short sale, deed in lieu of foreclosure, or bankruptcy. This program began on August 15, 2013 and is set to expire September 30, 2016. Not everybody will qualify for this new program but it may be very beneficial for many borrowers.
Individuals can also receive an FHA loan during a Chapter 13 bankruptcy as long as that individual has made 12 months of satisfactory Chapter 13 plan payments and has the Court’s approval.
Your credit score will affect the rates you receive on post-bankruptcy mortgage loans. Your credit score will be low immediately after you file but should consistently rise as you maintain your monthly payments and do not have any further delinquent payments.
As always, please discuss any and all programs with your bankruptcy attorney before deciding on a certain course of action.