How Long After Bankruptcy Can I Buy a House?


Buying a house after bankruptcy may seem like an impossible feat, but it’s actually not out of the question. Even if you have a Chapter 7 or Chapter 13 bankruptcy on your credit report, you can still buy a home after a certain period of time.

Buying a home

The exact length depends on several factors, including the type of bankruptcy and the type of home loan you’d like to get. Mortgage lenders weigh your credit score heavily when evaluating your mortgage application. So, you’ll also need to re-establish your credit score after it’s been lowered by filing bankruptcy.

But you don’t need to be overwhelmed by this process. With a little patience and the right knowledge, you’ll get back into a home you can call your own, even with a bankruptcy in your past.

Can you buy a house after bankruptcy?

In some cases, home buyers can get approved for a mortgage 24 months after Chapter 7 bankruptcy discharge and immediately after Chapter 13 bankruptcy discharge.

Chapter 7 Bankruptcy Waiting Periods

Depending on your mortgage type, the waiting period to buy a home after Chapter 7 bankruptcy can range from two to four years.

Here are the mortgage types and waiting periods from the date of discharge:

  • FHA loans: 2-year waiting period
  • VA loans: 2-year waiting period
  • USDA loans: 3-year waiting period
  • Conventional loans: 4-year waiting period

For buyers with extenuating circumstances, the FHA allows a 12-month waiting period. Fannie Mae and Freddie Mac allow a two-year waiting period.

Chapter 13 Bankruptcy Waiting Periods

The waiting period to buy a home after Chapter 13 bankruptcy can range from immediately to two years.

Here are the mortgage types and waiting periods from the date of discharge:

  • FHA loans: No waiting period
  • VA loans: No waiting period
  • USDA loans: 1-year waiting period
  • Conventional loans: 4-year waiting period

The bankruptcy court must also approve you taking on new debt if you plan to purchase a home during a Chapter 13 bankruptcy.

What qualifies as extenuating circumstances for bankruptcy?

Extenuating circumstances for bankruptcy can include unexpected medical expenses, job loss, divorce, death of a spouse, and business failure. Other factors that may be considered extenuating circumstances include natural disasters, high debts due to student loans, and predatory lending.

What types of home loan can you get after bankruptcy?

The process for buying a house after Chapter 7 bankruptcy, or even Chapter 13 bankruptcy, depends on the type of mortgage you apply for. Each one has a different “seasoning” period, which determines how long you have to wait until you qualify again.

You also have to meet the mortgage lender’s other basic mortgage requirements as well.

Here are three of the most common mortgage products available today and their bankruptcy policies.

FHA Loans

FHA loans are backed by the Federal Housing Administration (FHA), part of the Department of Housing and Urban Development (HUD). They are government-backed loans that offer homebuyers who lack a stellar credit history the chance to purchase a home.

So, how long after filing bankruptcy can you get an FHA mortgage? The waiting period to qualify depends on what type of bankruptcy you filed.

Chapter 7

For a Chapter 7 bankruptcy, there’s a two-year waiting period from the date the action was discharged (not filed). Some lenders might require a longer period, but two years is the legal minimum.

Chapter 13

The waiting period for FHA loans after a Chapter 13 bankruptcy is a bit more complicated.

FHA loans can be obtained even while you’re still paying on this type of bankruptcy. This is as long as your payments are verified and you have consistently paid for at least a year.

You’ll also need a bankruptcy court trustee’s written approval and a written explanation of the bankruptcy included in your mortgage loan application.

FHA Loan Requirements

In addition to meeting the waiting period for your type of bankruptcy, you must also meet the basic requirements of an FHA mortgage.

You can purchase a home with as little as a 3.5% down payment if your credit score is 580 or higher. However, if your credit score is 579 or lower, you must pay 10% of the home’s purchase price as your down payment.

You have to pay a mortgage insurance premium if you have less than 20% equity in the home, which is rolled into your monthly mortgage payment. The annual premium you pay ranges from 0.45% to 0.85% of the loan amount and depends on the amount of equity and your mortgage term length.

VA Loans

VA loans are U.S. Department of Veterans Affairs and offered to active members of the military and veterans. They include several benefits, including no down payment and competitive interest rates.

Luckily, you can still apply for a VA loan even after a bankruptcy filing. The waiting period is the same as an FHA loan: a minimum of two years from the discharge date.

Keep in mind that you still have to qualify for all the other aspects of the loan. Most mortgage lenders require a minimum credit score of 620 and a debt-to-income ratio of no more than 41%. You’ll also need to obtain a Certificate of Eligibility that proves your military status.

There is no mortgage insurance attached to a VA loan. However, most borrowers have to pay a funding fee based on your down payment amount and the number of times you’ve used a VA loan.

Not all lenders finance VA loans, so make sure you work with one who has specific experience in this niche since there are some rigorous guidelines involved.

USDA Loans

USDA loans come from the United States Department of Agriculture. You can get a USDA loan for homes in qualifying rural areas. USDA loans generally require a minimum credit score of 640, and you can get a USDA loan one year after bankruptcy.

Conventional Loans

Conventional loans have some of the strictest underwriting standards, and they become even more stringent when there’s a bankruptcy involved. The waiting period for a conventional mortgage is four years from the discharge date of a Chapter 7 bankruptcy.

For a Chapter 13, it’s two years after the bankruptcy discharge date, unless it was dismissed without a discharge, in which case the waiting period is four years.

You’ll need to use that time to work on rebuilding your credit. You should be saving up your cash to qualify for a conventional loan because most lenders require a 640 credit score and a large down payment.

Furthermore, you might qualify with a lower credit score if you can put down a larger amount of money. It’s always best to compare eligibility requirements, and interest rate offers from several lenders.

How does bankruptcy affect your credit score?

Even if you’ve met the appropriate waiting period to apply for a home loan, you still need to repair your credit to qualify. Whether you’re applying for an FHA loan, a VA loan, or a conventional loan, you’ll most likely need your credit score to be between 580 and 640.

On the plus side, a Chapter 7 bankruptcy filing automatically wipes out your unsecured debts, so your “amounts owed” category can rebound pretty quickly. This also helps your debt-to-income ratio when it comes time to apply for a mortgage loan.

Ready to Raise Your Credit Score?

Learn how credit repair professionals can assist you in disputing inaccuracies on your credit report.

But a bankruptcy can cause your credit score to drop as much as 240 points, and it takes time to bring it back up. How long? A Chapter 7 bankruptcy stays on your credit report for up to ten years. A Chapter 13 bankruptcy remains on your credit report for up to seven years.

Begin Repairing Your Credit as Soon as Possible

There are a few things you can do right away to begin repairing your credit score. The first is to pay all of your bills on time each month so that you can rebuild your payment history.

You should also keep your oldest credit accounts active, even if you don’t use them. The length of your credit history accounts for 15% of your credit score, so this is a simple way to refrain from losing any more points.

Buying a house after bankruptcy is by no means unattainable. It just takes patience and diligence to rebuild your credit scores while waiting out the waiting period.

Can you buy a house after a foreclosure?

Purchasing a home after a foreclosure is a bit trickier than a bankruptcy because you’ve shown poor ability to make your mortgage payments.

But nothing is impossible; you’ll just have to wait a bit longer than you would with a straightforward bankruptcy. Here’s how it works.

For conventional loans, you can expect a seven-year wait period from the actual date the foreclosure was filed (it stays on your credit report for the same amount of time). However, FHA loans only require a three-year wait period.

However, if the foreclosure was caused by a situation beyond your control, you may be able to shorten the waiting period for both types of loan.

Examples of this include a substantial period of unemployment, a major illness, or a divorce. To shorten a conventional loan wait time from ten years to three years. You’ll also need at least a 10% down payment or 90% loan to value ratio.

What if you had both a bankruptcy and a foreclosure?

You can still get a mortgage after bankruptcy and foreclosure. You just need to clarify at which point each waiting period begins.

This can be a little tricky since some factors in both cases overlap with one another. Typically, the waiting period begins when you no longer owe the debt, but each lender views things differently.

Foreclosures discharged in Chapter 7 bankruptcy are subject to a two-year waiting period following the discharge of the bankruptcy, not from the date of foreclosure.

It’s always best to review your personal credit report with your mortgage lender to ensure you’re interpreting it correctly.

How can I start rebuilding my credit after bankruptcy?

Bankruptcy is a difficult experience that can have a long-lasting impact on a person’s credit score. Fortunately, there are ways to rebuild your credit after bankruptcy.

One of the best methods is to take out a credit builder loan. A credit builder loan is a small, low-interest loan that is designed to help you rebuild your credit.

See also: Best Credit Builder Loans

Another way to rebuild credit after bankruptcy is to get a secured credit card. A secured credit card is a type of credit card that is secured by a cash deposit. This cash deposit acts as collateral for the card issuer and can help you rebuild your credit score.

See also: Best Secured Credit Cards

When you take out a credit builder loan or secure a credit card, it is important to make sure that you make your payments on time every month. Late payments can have a negative impact on your credit score, so be sure to pay your bills on time.

You should also make sure to use your credit wisely. Try to only use your credit for necessary purchases and make sure to pay off the balance in full each month. It is best to keep your credit utilization rate low. This means that you should use no more than 30% of your available credit each month.

Final Thoughts

Buying after a house bankruptcy requires patience. It also takes time for your credit score to improve, so be sure to stick to your plan and keep track of your progress. With the right plan and a bit of patience, you can rebuild your credit and get back on the right financial track.

Going through bankruptcy or foreclosure might seem like a huge bump in the road, but it’s not insurmountable. You still have the opportunity to purchase your own home after just a bit of waiting and working.

Review your financial situation to determine which type of mortgage would be best for you and how long you have to wait before applying for one. Then, take careful steps to repair your credit. This will ensure your application is approved and you get the best interest rates available.

If you feel more comfortable getting professional help in rebuilding your credit, contact our partner Credit Saint. They may be able to help you remove negative items like a bankruptcy or foreclosure on your credit report.

Let Credit Saint deal with creditors and credit bureaus for you to help you get one step closer to being in a house you can call your own.

Lauren Ward
Meet the author

Lauren is a personal finance writer who strives to equip readers with the knowledge to achieve their financial objectives. She has over a decade of experience and a Bachelor's degree in Japanese from Georgetown University.