Filing for bankruptcy is something that many Americans find themselves doing at some point. Whether it's because of high medical costs, difficulty finding employment, or simply mismanaging your finances, bankruptcy is often the best solution to get your financial life back on track. While bankruptcy can lift some of your financial burdens, you will feel the impacts of filing for years to come. It can make certain things, like getting a mortgage, difficulty. Here's what you need to know about getting a home loan after bankruptcy.
The first thing that you should be aware of is that you may have to wait a designated amount of time before you are able to qualify for certain personal and home loans. After a Chapter 7 bankruptcy, you will need to wait 2 years before being able to qualify for an FHA loan, 2 years for a VA loan, 3 years for a USDA loan, and 4 years for a Fannie Mae or Freddie Mac home loan. After a Chapter 11 bankruptcy, you will have to wait 1 year before qualifying for an FHA loan, a VA loan, or a USDA loan.
Conventional Mortgages Will Take Longer
If you are looking to get a conventional mortgage after filing for bankruptcy, be prepared to wait even longer. Whether you are filing for Chapter 7 or Chapter 11 bankruptcy, you will have to wait at least 4 years before being able to qualify for a conventional home loan. If you are looking to purchase a home faster, you may want to apply for a different type of loan. If you want a conventional home loan, lenders want you to re-establish your credit and improve your credit score.
Working On Your Financial Health Is Key
When it comes to getting a home loan after filing for bankruptcy, being financially secure and responsible is a must. At first, a bankruptcy can cause your credit score to drop by upwards of 200 points in some cases. While your score will gradually improve as time goes by as long as you pay your bills on time, the impacts of a bankruptcy can impact your credit for up to a decade. If you want to qualify for a home loan after bankruptcy, it's important to raise your credit score as much as possible. Saving a down payment and maintaining a low debt-to-income ratio can also help you qualify for a mortgage.
Buying a home after filing for bankruptcy can be a challenge. In order to qualify for a loan, there are waiting periods that you must sit out. In order to get a conventional home loan you will need to wait at least 4 years. In the meantime, working on improving your credit score and being financially responsible will ensure that you qualify once the waiting period is over for the home loan you desire.