Buying A Home After a Chapter 7 or 13 Bankruptcy

Buying A Home After a Chapter 7 or 13 Bankruptcy

After filing for bankruptcy, buying a house may seem more like a dream than a possibility. You’re essentially going back to square one, making it more challenging to secure a mortgage at a reasonable rate. But, as with most things, there are multiple paths to your destination of homeownership. Wondering how you should go about it? To find out the answer to that and more, read on. 

In this article, we’ll dive into what buying a house after bankruptcy looks like and reveal everything you need to know about the process. 

Can You Get A Mortgage with A Bankruptcy?

Getting a mortgage during bankruptcy is uncommon, but you can absolutely qualify for one after it's been discharged. You’ll only qualify if you meet specific requirements, including waiting for a specified amount of time to pass, achieving a minimum credit score, and providing proof of income. The exact qualifications vary depending on the lender and the type of loan you’re seeking. 

Note: You can get an FHA loan during your Chapter 13, provided you’re 12 months in and you’ve been making payments on time every month. 

How Long After A Bankruptcy Can You Get A Home Loan?

The waiting time for a home loan depends on the type of bankruptcy filed and what kind of loan you’re applying for. After Chapter 7 bankruptcy, you’ll have to wait between 2 to 4 years after your dismissal or discharge date. For Chapter 13 bankruptcy, you may be able to apply immediately after your bankruptcy is dismissed or discharged. However, to receive a conventional loan, you’ll have to wait for 2 years. 

Home Loans for Bankruptcies 

When it comes to securing a mortgage after bankruptcy, requirements differ depending on the individual lender. Some loan types are more accessible after bankruptcy than others. Want to know more? Here are a few loan types you should consider after filing for bankruptcy. 

FHA Loans

Federal Housing Administration (FHA) loans have looser financial qualifications than other loan types, making it an excellent choice to consider after a bankruptcy. It’s government-backed and easy to qualify for. You won’t need a sizeable down payment or a high credit score (many people are approved with a below-average credit score).

Many applicants will be eligible for an FHA loan just one year after the discharge of their chapter 7 bankruptcy. However, this is usually reserved for applicants who can prove that the bankruptcy stemmed from factors that were outside of their control, like illness, unexpected emergencies, automobile accidents, and natural disasters. There’s no waiting period after a Chapter 13 bankruptcy – you may be able to qualify immediately. 

VA Loan 

Veterans Affairs (VA) loans are federal mortgage loans for military personnel. Although private lenders finance the loans, the Department of Veterans Affairs backs them and offers a guarantee. VA loans typically have low interest rates and don’t require a down payment, making them a very affordable option for buying a house post-bankruptcy. 

If you qualify, you can use your VA loan to either purchase property as your primary residence or refinance your existing mortgage. Despite the name, VA loans aren’t just available to veterans. Surviving spouses, reservists, and active-duty members of the Air Force, Marine Corps, Navy, Coast Guard, and National Oceanic & Atmospheric Administration are also among the list of eligible VA borrowers. 


USDA loans are another fantastic option for buying a home after chapter 7 or 13. Many have a low minimum credit score and don’t require a down payment. You might even qualify as soon as one year after your bankruptcy has been discharged or dismissed. Although they’re more accessible than traditional loans, a few things will prevent you from qualifying: 

  • Unverifiable income.
  • Inadequate savings.
  • Unstable employment history.
  • Undisclosed debts. 

Peer-To-Peer Loans

Peer-to-peer loans, P2P for short, are an excellent way to secure funding without having to go through a traditional financial institution. Since individuals fund your loan, you have a better chance of finding someone willing to overlook your bankruptcy history. You may even be able to negotiate your interest rate and collateral requirements. 

Secured Loan

If your credit isn’t good enough to qualify for other types of loans, a secured loan might be just the thing you need. Secured loans alleviate some of the risks of lending by putting up your possessions as collateral. Your lender will place a lien on your asset until you’ve paid off your loan in full. 

Secured loans tend to have relaxed requirements, as many lenders don’t typically require a specific credit score or down payment. However, you’ll likely have to pay a higher interest rate, and you can lose your assets if you default on your loan. For that reason, they’re considered one of the risker options for borrowers. 

How To Buy A Home After A Chapter 7 Or 13

Now that you know that buying a home after bankruptcy is possible, you probably want to know how to go about it. Luckily, the process is simple and mostly centers around proving you’ve learned from the bankruptcy and are making an effort to improve your financial health. The following is a list of steps you should take to buy a home after a chapter 7 or 13. 

  • Start rebuilding your credit. 
  • Develop good financial habits and review your credit report often. 
  • Pay all of your bills and outstanding debts on time. 
  • Provide a letter of explanation detailing any extenuating circumstances that led to you filing for bankruptcy. 
  • Different types of loans have varying requirements and waiting periods, so do your research on which one will provide you with the best return. 
  • Get pre-approved to get a clear idea of what you’ll be able to afford. 

Resources Available to Prospective Homebuyers with Prior Bankruptcies

Buying a home is a lengthy, often frustrating process, even if you haven’t filed for bankruptcy before. Luckily, there is help available. Here are some resources to help you secure funding after filing for bankruptcy. 

Friends and Family

Asking a friend or family member to co-sign for a new credit line can help you build up your credit history and increase your chances of securing a mortgage loan. Keep in mind that they’re taking on considerable risk. They can be held liable if you fail to make your payments. 

Friends and family can also gift you money that you can put towards the purchase of a new home. However, some loan types restrict who can gift you money, so you’ll have to double-check with your lender. 

Government-Backed Loans

Unlike conventional loans, government-backed mortgage loans tend to have more flexible minimum requirements. They are also more affordable on average. So, if you have difficulty qualifying for a traditional loan, a government-backed loan may be your best bet. 

Secured Lines of Credit

Unlike unsecured lines of credit, secured credit is backed by collateral, like a car or home. They are much more accessible after bankruptcy because they give the lender a way to minimize risk. Collateral makes the lender more comfortable since they have a way to protect their financial stake if you, the borrower, fail to repay your loan. You can use a secured line of credit to rebuild your credit and make buying a home easier.  

The terms “mortgage” and “bankruptcy” don’t usually go hand in hand. Yet, buying a home after a chapter 13 or 7 bankruptcy is 100% possible. We hope this article has been helpful to you. You now have the tools to regain control over your financial health and become a homeowner!  

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