Buying A Home After Bankruptcy

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How Long After Bankruptcy Can I Buy A Home?

If you're looking to buy a home and filed for bankruptcy in the past few years, there is some good news on the mortgage front. There are new rules in 2016 regarding conventional and FHA loans. Both FHA and conventional mortgages have a reduced waiting period of two (2) years, vs. the previous waiting period of four (4) years for conventional loans post Chapter 7 bankruptcy.

"After Chapter 7 bankruptcy, (not to be confused with Chapter 13 bankruptcy rules) the borrower must wait out the FHA's minimum seasoning period. At the time of this writng, that period is two (2) years plus any additional amount required by the lender. Some banks will require that a borrower wait a total of three years before applying for a new home loan." – FHA.com

You can apply for a new FHA mortgage in one (1) year under the FHA's Back to Work program. It's important to know, the waiting period starts from the time the bankruptcy is discharged and NOT from the time bankruptcy is filed.

In either case, you will need to provide "extenuating circumstances" that caused your bankruptcy and provide documentation to prove it. Medical bills, divorce decree, proof of job loss or business failure, etc. are all good ways to show you qualify. You must also prove this is a one-time event and not likely to be repeated in the future.

What qualifies as "extenuating circumstances"?

• Sudden loss of income like the failure of a business or loss of a job, followed by an extended period of unemployment
• Major personal illness that resulted in loss of income
• Divorce can be considered

What DOES NOT qualify as "extenuating circumstances"?

• You walked away from a mortgage that was no longer profitable
• You spent more money that you earned

Dean Paolucci, our bankruptcy attorney, can help you determine when you should apply for a mortgage after your bankruptcy. Call us and we can help you figure out the details of your home before, during, and after bankruptcy. You might think you need to move out of your house right away if you receive a foreclosure notice or if you decide to file bankruptcy, but Dean will develop a strategy to use when dealing with foreclosure and your home. He'll outline the best options for your unique situation.