Factors That Affect How Soon You Can Buy a House
The answer to this question depends on several factors, including the type of bankruptcy filing (such as chapter 13), your credit score, and the type of mortgage loan you want. Some government-backed loans let you apply sooner than conventional loans.
Most bankruptcy cases fall into two main types:
- Chapter 7 bankruptcy: You discharge most unsecured debts.
- Chapter 13: You follow a repayment plan for 3 – 5 years.
The waiting time begins once your bankruptcy is discharged or completed.
FHA Loan as a Path After Bankruptcy
Many people turn to FHA loans after bankruptcy because they are government-backed and offer flexible credit guidelines.
The typical waiting period for an FHA loan after Chapter 7 is 2 years (from the discharge date).
For chapter 13, you may qualify after making 12 months of on-time repayment in your plan, with trustee approval.
An FHA loan also requires mortgage insurance, which adds to your monthly payments, but it can be a helpful way to buy a house again if your credit score is still rebuilding.
Minimum Credit Score
To qualify for most mortgage loans, you must meet a minimum credit score requirement. For FHA loans, the minimum is generally around 580. Some mortgage lenders may consider lower scores if you provide a larger down payment, but policies vary. The main goals during this period are to:
- Raise your credit score steadily and consistently
- Review your credit report regularly
- Correct any errors and make consistent payments on time
Rebuilding your credit is essential to securing better terms from mortgage companies.
Credit Report
Your credit report will show your bankruptcy for 7 – 10 years (depending on the type of bankruptcy). But this does not mean you cannot get a home loan during that time. Mortgage underwriters care more about your recent payment behavior. Showing responsible financial decisions after your bankruptcy filing helps rebuild lender trust.
Chapter 13 Bankruptcy
If you filed a Chapter 13 bankruptcy, the timeline for buying a house is different from that of a Chapter 7 bankruptcy. Since Chapter 13 involves ongoing repayment, some lenders allow you to apply for a mortgage loan while still in repayment, as long as you have made 12 consistent payments and obtained approval from the court. The good news is that this can be a faster path for some buyers.
Mortgage Lenders
Remember that different mortgage lenders have different rules for qualification. Some specialize in working with people who have a history of bankruptcy.
When you start your mortgage application, always be upfront about your history because transparency helps avoid delays. Before applying, gather all the proof of your stable income, savings for a down payment, and a pattern of responsible monthly payments.
Conventional Loan
A conventional loan does not have government-backed loan support. Because of this, the waiting period after bankruptcy is generally longer. Most lenders require 4 years after a Chapter 7 discharge and 2 years after a Chapter 13 discharge for conventional loans. A higher credit score is also required for a conventional loan compared to an FHA loan. The trade-off: a conventional mortgage may not require mortgage insurance once you have enough equity, which can lower mortgage payments.
