Bankruptcy is the effect of a debtor not being able to pay off their growing financial obligations. Contrary to popular belief, you’re not a bad person if you have to file for bankruptcy and each person that does so has their own personal reasons for taking that step. In a lot of cases, it becomes the only option one has left to go with. Sometimes all it takes is unemployment or a medical emergency to push one into crippling debt. Bankruptcy is not a quick fix to your money problems and you’ll definitely be feeling the effects of it for a number of years to come. Your credit will be affected in every way. It can be enough to affect the transactions you’re able to make for ten years at the most. You might run into automatic rejections simply because there’s a bankruptcy on your file and it makes you look more liable to default again in the future. All of these things are part of the process, but you will come out on the other side having learned a lot. If you’ve still got dreams of owning a house after all is said and done, you can manage to get a mortgage after bankruptcy.
If you’re trying to get a traditional mortgage after bankruptcy, you’re going to have to wait more than three years after a Chapter 7 bankruptcy is cleared and two years after a Chapter 13 has been cleared. If you can somehow prove that your filing for bankruptcy was due to a situation beyond your control that isn’t likely to happen again–like sudden sickness or death of a spouse or job loss–you might be able to have the waiting period after your Chapter 7 bankruptcy shortened to two years instead of four. In short, it’s very possible to acquire a mortgage after bankruptcy so long as you’re intending to keep your affairs in tight order.
Applying for FHA and VA Loans
The Federal Housing Authority guarantees loans to millions of prospective homebuyers that just can’t seem to get a loan taking the traditional route. They set shorter time restrictions on those people trying to get a mortgage after bankruptcy or some other hard-hitting credit event, like a foreclosure. If you’ve experienced a foreclosure or short sale, you’ll have to wait three years and if you’ve filed for Chapter 7, you’ll have to to wait two years. The Veteran’s Administration has the same exact rules and they both allow those that have filed for Chapter 13 to apply for a mortgage after 12 months of good payment history as long as they’ve got an “OK” from the bankruptcy court.
“Back to Work” Program
There’s another way you can obtain a mortgage after bankruptcy as early as one year after a bankruptcy has been discharged. This program is known as the Back to Work program and to qualify, one must be able to prove that situation which caused their bankruptcy was unexpected and out of their personal control: like being fired or laid off or contracting a life-threatening illness of some sort. To be viewed as a successful applicant, you have to be able to show that you’re recovering well from the blow and working hard to turn your situation around. You also have to be able to show that your credit was in a good place before the financial incident took its toll. Housing counseling is one of the requirements of this program and it should help you find ways to avoid a bad situation again.
If you’re looking to get a mortgage with several negative credit lapses under your belt, you’re not likely to get the answers you want. You could end up facing very long waiting periods up to five years since you’ll be viewed as a much bigger risk for all of the negative credit situations on your history.
Getting Back on the Right Track
If you’re in the process of rebuilding your credit, you should expect to wait a while before you can get your hands on any kind of credit cards or the like. You’ll have to prove to these institutions that you’re worthy of their time and efforts before they’ll give you any kind of benefits. It’s not difficult to get in their good graces again. You have to be committed to making all of your payments on time, getting a secured credit card, having your on-time rent payments reported to credit bureaus and monitoring your credit with a fine tooth comb.
It might seem impossible now, but there are ways for you to manage a mortgage after bankruptcy. You will definitely have to work hard to make sure you stay accountable for your actions and history. As long as you make an effort to stay in the positive, you will be rewarded for your consistency, especially if it wasn’t your fault to begin with. That mortgage after bankruptcy can be yours!