As many of you know, I often write blog posts based on things that have happened during the week, questions I get while I am speaking to various groups, or bad information I read online. This week, mortgages came up several times, so I figured that was my sign to talk about mortgages and bankruptcy.
The common misconception out there is that you have to wait 10 years after bankruptcy before getting a mortgage. I’ve also heard you have to wait 10 years after bankruptcy to really qualify for any type of credit. Both of these are way off base.
Let’s talk about mortgages. I’ve included a handy chart that Maureen Torretto at LoanDepot provided to me last year. I verified with her that this chart is still up-to-date. Some important points that I continuously make with clients who are worried that they will never be able to buy a house:
- After a Chapter 7 bankruptcy discharge, the wait period is 1 year for FHA and VA loans with extenuating circumstances.
- You can buy a house DURING a Chapter 13 bankruptcy. If you make 12 monthly payments on-time to the Chapter 13 trustee, you are eligible for FHA, VA, and USDA loans.
- Without “extenuating circumstances” in a Chapter 7, the wait period is 2 years for FHA and VA. Again, nowhere close to 10 years.
My main point is that bankruptcy is often the quickest way to qualify for a mortgage, which is exactly the opposite of what most people think. That fear prevents people from finding out what their rights and options are for their individual situation. Not that I’m advocating for everyone to go out and file for bankruptcy, but serious financial decisions require correct information. I find that the misinformation out there has caused a lot of people to make poor financial decisions. Knowledge really is key in these types of situation.
This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.
Hello,
My husband and I filed for Chapter 7 in May, 2018. We/I lost the house…only in my name as a sole married owner. We’ve been renting a house since August, 2018, paying everything in time and are working on rebuilding our credit. Our credit score is 630 and 680. My question is: can my husband apply for a VA loan to buy a house now? He has never bought a house so he’d be a first time owner. Could I be in the loan even though my house was foreclosed?
I can’t find any specific info about it anywhere.
Thank you so much!