Filing a bankruptcy and receiving a discharge in bankruptcy does not create a barrier to home ownership if the individuals are otherwise able to become credit worthy in the future. The central premise of bankruptcy law in the United States is to give individuals a fresh start in their financial lives. Property acquired after a bankruptcy filing is not subject to the claims of pre bankruptcy filing creditors or the bankruptcy trustee acting on behalf of creditors.
People who have recently experienced bankruptcy can consult a bankruptcy law firm to help them determine if they are eligible for a home loan, even while their credit reports reflect their previous financial troubles. An individual’s eligibility depends on the type of bankruptcy they declared.
Those who filed for Chapter 13 bankruptcy may be able to apply for an FHA or VA mortgage loan one year after bankruptcy proceedings or for a conventional home loan after two years. Chapter 7 bankruptcy filers may request a mortgage loan through FHA or VA two years after the legal action, or they may wait four years for a conventional loan.
After the waiting periods, lenders will grant or deny home loans by reviewing an applicant’s financial information. People who pay their bills on time and avoid incurring new debt are the most likely to qualify.
And though bankruptcy lowers credit scores, those wishing to secure mortgage loans can take steps to repair their record. For example, getting a credit card and always paying the balance in full can help to build good credit. And maintaining a savings and checking account can demonstrate to lenders an applicant’s budgeting skills.
Declaring bankruptcy can be an overwhelming experience for many people. They may feel that their financial history will follow them forever, preventing them from leading a normal life. But life after bankruptcy can be viewed as a fresh start. With a little patience, a person who was in over their head with money matters just a few years ago may find themselves qualifying for a home loan.
For more information regarding bankruptcy, contact our office for a consultation.