You may have heard the saying, “Life happens while you’re making other plans.” No one plans to lose their job, have a significant medical emergency, or go through a divorce, but all these life events often lead to bankruptcy. Sometimes, no matter how much you try, difficult things happen. You do the best you can to hold it together, but before you know it your only way out of the situation seems to be filing for bankruptcy.
The good news is that you will overcome, and time heals the wounds. Once things settle down and you master the rough times, you might find yourself dreaming about repurchasing a home. Many people ask us if you can ever purchase a home again after bankruptcy, and if so, how long do you have to wait. Good news, different loan types, from FHA to VA loans and conventional, all have clear guidelines on when you can buy a home again after filing bankruptcy. So, it depends on what type of loan you are trying to get.
Conventional Loan (Fannie Mae) Waiting Periods
With conventional loans, your waiting period is determined by a couple of factors. The main element is your type of bankruptcy and if you’ve filed for bankruptcy more than once.
Chapter 7 or 11 Bankruptcy
If you had Chapter 7 or 11 Bankruptcy, you generally have to wait four years from the discharge date. That may feel like a long time, but it goes by quickly, and before you know you’ll be out shopping for a new home for your family.
Chapter 13 Bankruptcy
With a Chapter 13 Bankruptcy, you’ll have to wait two years from the discharge date, or four years from the dismissal date. You may be wondering what the difference is between a discharge and a dismissal. With a discharge, your debt is wiped out completely. However, if you change your mind during the proceeding, you’ll receive a dismissal rather than a discharge.
Multiple Bankruptcy Filings
If you’ve had more than one bankruptcy in the past seven years, you will have to wait at least five years to qualify to purchase a home again. The time is measured from your most recent discharge or dismissal date.
Loans backed by the Federal Housing Authority (HUD) are a little more lenient. It only requires two years to have passed after the bankruptcy discharge before you can qualify for a new loan. You may have heard from friends that say they didn’t have even to wait that long. That’s because sometimes the FHA introduces special programs to shorten the waiting period, such as during the Great Recession of 2008. The program was specifically designed to assist borrowers whose bankruptcy was a direct result of the economic downturn.
VA and USDA Loans
The VA generally requires a waiting period of two years from the discharge date of the bankruptcy. Sometimes that period may be shortened for “circumstances beyond your control,” such as the death of a spouse or a significant medical problem. USDA loans require you to wait three years from the discharge date, and there are not any exceptions.
If you would like more information about these loan programs or have a unique situation, make an appointment with your local home loan representative today. You might have some good news coming!
Note: Opinions expressed are solely my own and do not express the views of my employer