Home Mortgages and Bankruptcy

Filing for bankruptcy no longer creates obstacles for a future home buyer. Instead, many mortgage lenders have relaxed requirements so that even individuals who file for bankruptcy are able to obtain a home more quickly than ever before. The following will discuss some available mortgage loans and how they are affected by the bankruptcy process.

Federal Housing Authority (FHA) Loans

FHA loans are federally-insured loans and are attractive to many because they allow a buyer to put down only 3.5% of the home’s purchase price. The credit score limits for these loans are also much more generous than other types of conventional loans. In many cases following a Chapter 7 bankruptcy, a person will be required to wait two years to obtain this type of loan. If a person opens a new credit account after filing for bankruptcy, he or she will often be required to make payments on time to establish a good credit history. Other individuals decide to speed up the qualification process by not opening any credit accounts following bankruptcy. Instead, if a person is able to demonstrate that filing for bankruptcy was beyond his or her control, it is possible to reduce the waiting period to 12 months. It is also possible for individuals who have filed for Chapter 13 bankruptcy to obtain FHA loans.

United States Department of Agriculture Loans

Low as well as middle income borrowers are often willing to purchase homes in rural communities, which will also benefit from the loan. As a result, this program offers low-interest, no down payment loans for individuals who would not be able to qualify for more conventional financing. Applicants are eligible for loans three years after receiving a Chapter 7 discharge. If a person qualifies for an exceptional circumstance loan, however, and a bankruptcy was beyond his or her control, that person might be able to qualify as soon as 12 months following a discharge. A Chapter 13 bankruptcy filer can apply for this type of loan after 12 months of successful plan payments or on a showing of extraordinary circumstances.

Veteran’s Affairs (VA) Loan

The VA loan program is a benefit offered to veterans with housing needs. Some of the unique characteristics of this program include no down payment requirement, no minimum credit score, greater allowance of seller credits than other loans, and unlimited use of the loan program. The VA considers a person’s credit re-established following bankruptcy when that individual has had two years of clean credit. Even though a bankruptcy will not automatically disqualify a person from obtaining a VA loan, an individual will often be required to pay back any money owed if he or she purchases a house with a VA loan and then loses the residence as a result of a foreclosure.

Speak with an Experienced Bankruptcy Lawyer

If you have questions or concerns about how bankruptcy will affect your mortgage, you should not hesitate to speak with a knowledgeable attorney. Contact attorney Jim A Lyon today to schedule an initial case evaluation.