The timeline for buying a house after bankruptcy varies depending on the type of bankruptcy you filed and the type of loan you seek. Here are some general guidelines: After filing for Chapter 7 bankruptcy, you will usually have to wait for a minimum of two to four years before becoming eligible for a mortgage. However, during this waiting period, you can rebuild your credit by paying bills on time, disputing credit report errors, and using credit responsibly. After two to four years, you may be eligible for an FHA loan or a conventional loan. The Federal Housing Administration (FHA) offers loans to individuals with lower credit scores or who have filed for bankruptcy in the past. If you have filed for Chapter 7 bankruptcy, you will typically have to wait at least two years before qualifying for an FHA loan. If you filed for Chapter 13 bankruptcy and have made all your payments on time for at least one year, you may be able to qualify for an FHA loan. Conventional loans generally have stricter eligibility criteria than FHA loans, as they are not government-backed. After filing for Chapter 7 bankruptcy, it is typical to wait for at least four years before qualifying for a conventional loan. However, if you can show extenuating circumstances such as job loss or medical emergency, you may be able to qualify after just two years. For Chapter 13 bankruptcy filers, you may qualify after four years of on-time payments and approval from the bankruptcy court. VA loans are a viable option for veterans or active-duty military personnel, as they offer low-interest rates and favorable terms. They are backed by the Department of Veterans Affairs. After filing for Chapter 7 bankruptcy, you will generally have to wait for at least two years before being able to qualify for a VA loan. If you filed for Chapter 13 bankruptcy and made on-time payments for a minimum of one year, you may qualify for a VA loan. Several factors can affect the timeline for buying a house after bankruptcy. Here are some of the most important considerations: The type of bankruptcy you file will have a significant impact on how long you have to wait to buy a house. Chapter 7 bankruptcy, also known as "liquidation" bankruptcy, typically takes around two years before you can qualify for a mortgage. Chapter 13 bankruptcy, which involves a repayment plan, can take as little as one year before you can qualify for a mortgage. After filing for bankruptcy, your credit score will likely be significantly impacted, which plays a crucial role in determining your ability to buy a house. The lower your credit score, the longer it may take before you become eligible for a mortgage. To improve your credit score, you can pay off debts, dispute credit report errors, and use credit responsibly. The FICO and VantageScore are the most well-known credit scores and they both use a credit score range of 300 to 850 in general. Your employment history and current income are also important factors in determining how long you must wait to buy a house after bankruptcy. Lenders want stable employment and income to ensure they can afford the mortgage payments. If you have a consistent work history and steady income, you may be able to qualify for a mortgage sooner than someone who has recently changed jobs or has an irregular income. Your debt-to-income (DTI) ratio is a measure of how much of your income is going toward debt payments. Lenders typically want to see a DTI ratio of no more than 43%. After bankruptcy, your debt-to-income ratio may be higher than the ideal range. To lower your DTI ratio, you can pay off debts, increase your income, or decrease your expenses. While the waiting period for buying a house after bankruptcy can be frustrating, there are steps you can take to prepare for homeownership. Here are some things you can do: It's essential to rebuild your credit after filing for bankruptcy. To improve your credit score, you should pay bills promptly, manage credit utilization, limit new account applications, and monitor credit from time to time. Additionally, obtaining a secured credit card or a credit-builder loan can help establish a positive credit history. Saving for a down payment can be challenging, but it's essential if you want to buy a house after bankruptcy. Lenders typically require a down payment of at least 3% to 20% of the purchase price, depending on the type of loan. Saving for a down payment may require sacrificing your budget, such as cutting back on discretionary expenses. When you're ready to start house hunting, it's essential to shop around for a mortgage lender. Different lenders may offer different terms and interest rates, so comparing multiple options is important. You can also consider working with a mortgage broker who can help you find a lender that meets your needs. Before you start house hunting, getting pre-approved for a mortgage is a good idea. Pre-approval involves submitting your financial information to a lender, who will then determine how much you can afford to borrow. Getting pre-approved can help you narrow down your house-hunting options and show sellers that you are a serious buyer. Once you're pre-approved for a mortgage, you can start house hunting. It's important to work with a real estate agent who understands your financial situation and can help you find homes that meet your needs and budget. If you have filed for bankruptcy, buying a house may seem like an impossible goal. However, with time and effort, you can prepare yourself for homeownership. The timeline for buying a house after bankruptcy varies depending on several factors, including the type of bankruptcy you filed and the type of loan you seek. To prepare for homeownership, you can take steps such as rebuilding your credit, saving for a down payment, shopping for a mortgage lender, getting pre-approved for a mortgage, and working with a real estate agent. With patience and persistence, you can achieve your goal of owning a home. How Long After Bankruptcy Can You Buy a House?
Chapter 7 Bankruptcy
FHA Loans
Conventional Loans
VA Loans
Factors Affecting How Long You Have to Wait to Buy a House After Bankruptcy
Type of Bankruptcy Filed
Credit Score
Employment History and Current Income
Debt-To-Income Ratio
Steps to Take To Buy a House After Bankruptcy
Rebuild Credit
Save for a Down Payment
Shop for a Mortgage Lender
Get Pre-approved for a Mortgage
House Hunting
Final Thoughts
How Long After Bankruptcy Can You Buy a House? FAQs
If you file for Chapter 7 bankruptcy, you will typically have to wait at least two years before qualifying for a mortgage.
Yes, if you filed for Chapter 13 bankruptcy and have made all your payments on time for at least one year, you may be able to qualify for a mortgage.
Factors that affect the timeline for buying a house after bankruptcy include the type of bankruptcy filed, credit score, employment history and current income, and debt-to-income ratio.
To prepare for homeownership after bankruptcy, you can take steps such as rebuilding your credit, saving for a down payment, shopping for a mortgage lender, getting pre-approved for a mortgage, and working with a real estate agent.
Yes, there are loan options available for individuals who have filed for bankruptcy, including FHA loans, conventional loans, and VA loans. The waiting periods and eligibility requirements vary depending on the type of bankruptcy and loan.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
