Bankruptcy (BK) - How you can get a home loan even with a bankruptcy on your credit report. Home purchase after bankrupcty is not that difficult as one might think. One of the biggest misconeptions is you have to wait 7 to 10 years to get a mortgage after filing bankruptcy but that is not true. You can obtain a mortgage in as little as a year bankruptcy and that depends on what type of bankrupcty you filed and the circustances surrounding what caused you to file. You can get a home loan for purchase or refinance whether you filed a chapter 13 or a chapter 7 BK.
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Let's take a look at the different types of bankruptcies first - for individuals, bankruptcies come in two categories:
- Chapter 13 Bankruptcy - debts are reorgainzed and paid back at lower amounts
- Chapter 7 Bankruptcy - unsecured debts are wiped away with no repayment
Chapter 7:
This allows the person to wipe away all debts due to being insolvent at the time and not having the ability to repay the debts in a chapter 13 BK.
How to qualify for a home loan after a Chapter 7 Bankruptcy:
First you have to apply for the mortgage but you will want to make sure you are at least one year out fo the bankruptcy and in most cases 2 years. If you had a situation that was beyond your control such as a loss of income from a death in the family or some life changing event beyond your control and the underwriter approves it, in rare cases you can obtain a mortgage only a year out of the BK. In most cases you will need to be 2 years outside of the BK to obtain approval.
Chapter 13:
Let's look at what a chapter is: Chapter 13 allows the individual to save and keep their property,
and very often provides 3 to 5 years to repay debts. Chapter 13 Bankruptcy reorganizes debts under the supervision of
a court ordered repayment plan. This is commonly referred to as
a wage earner plan. Part of the individual's income is appropriated
every month for distribution to their creditors.
How to qualify for a home loan with a Chapter 13 Bankruptcy:
You can obtain a home loan for refinance or purchase in as little as one year outside of a chapter 13 bankrupty. A person can qualify for a home loan with at least one year good pay history to the trustee. All you need to do is apply for the home loan and either yourself or the loan officer can order the approval from your trustee once you are approved for you loan. In some counties you need to file a motion with the court to get approval but you can find out from your attorney or trustee whether or not this is necessary. Some Attorney's charge an extra
fee to file for a motion with the court in order to proceed with
a Chapter 13 refinance buy out but it's usually a very nominal fee. If you are considering a chapter 13 refinance loan you should also
obtain a copy of your credit report and make sure the items
that were included in the Bankruptcy were updated and show "Included in Bankruptcy" on the report.
If you have equity
in your home you may want to consult with us to see if you have the potential to refinance first before filing.
(as always seek attorney advice as we are not attorneys and therefore can not give out legal advice).
If you have filed BK and want to obtain a mortgage, find a mortgage
professional who specializes in helping the credit challenged. You
will usually find this with a mortgage banker. Another key aspect of mortgage banking is the underwriting happens in-house which affords greater ability to control the time line of closing. Mortgage Bankers also have the ability to broker the loan to multiple lenders to find just the right program for you. Having this ability
allows the mortgage banker to research a lender with niche or special
programs that do not conform to the standard guidelines. Another plus to having the underwriting done in-house means we are more familiar with the guidelines and what it's going to take to get the transaction closed.
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