Buying a House After Bankruptcy - What You Need to Know
It is definitely possible to buy a home after you have been. discharged in bankruptcy but there are some things you need to know.
First, remember that bankruptcy is designed to give the debtor a fresh start. Often a person finds that their FICO score increases a few months after a bankruptcy discharge because all or most debts are no longer owing. This means your income to debt ratio is probably better than it has been for a long period of time. Your goal should be to keep the ratio favorable while your FICO score improves each month.
The length of time you will have to wait before you can qualify for a new loan will depend on several factors including the following:
- The type of bankruptcy discharge,
- The type of loan for which you apply,
- The condition of the real estate market when you apply,
- Your FICO score when you apply, and
- The amount of cash you have available for a down payment.
After a Chapter 7 bankruptcy most buyers will have to wait 2 years after the discharge to obtain an FHA loan or a VA Loan. To obtain a conventional loan, most buyers will be required to wait 4 years. There is no standard waiting period to obtain a subprime loan, but 6 months seems to be the minimum time period.
A Chapter 13 is less serious than a Chapter 7 bankruptcy. While conventional lenders usually require a 4 year waiting period, FHA lenders and VA Lenders have no minimum waiting period.
A Chapter 7 bankruptcy will stay on the debtor's credit report for 10 years while a Chapter 13 bankruptcy will stay on a credit report for 7 years.