Mortgage After a Bankruptcy?


People file for bankruptcy every day, many for reasons outside of their control such as extended unemployment, divorce or unexpected medical debt. Bankruptcy can be a stressful, demoralizing time, and many people who file for bankruptcy worry that they will be unable to keep their homes, or will be unable to ever qualify for a mortgage again.

Will I be able to obtain a mortgage after a bankruptcy?

According to the Federal Housing Administration, “A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA mortgage provided the lender documents that one year of the payout period under the bankruptcy has elapsed and the borrower’s payment performance has been satisfactory (i.e., all required payments made on time). In addition, the borrower must receive permission from the court to enter into the mortgage transaction.” So, as long as you filed for bankruptcy more than 1 year ago, and within that time you have made all required payments under your bankruptcy settlement, you will likely be eligible for an FHA mortgage.

Additionally, the federal government has a program which may be available for homeowners who are in the middle of a bankruptcy: the Home Affordable Modification Program (or, HAMP). HAMP-modifications to mortgage loans can take place during an active Chapter 13 bankruptcy case, and require that you and your bankruptcy attorney submit a HAMP-modification require to the mortgage lender or servicer.

Traditionally, conventional mortgage lenders will often require a period of 2 years to have passed since the discharge of a bankruptcy, or 4 years since the dismissal of a bankruptcy. However, once that period of time has elapsed, you will likely be able to obtain a mortgage without many roadblocks, assuming that your credit score and any down payment are sufficient – just the same as any prospective borrower.

Although a bankruptcy, whatever the reason, will likely put you on a slower path to home ownership, there is no reason why you cannot recover from a bankruptcy and move forward with your plans to own a home. Today, lenders understand that people can get in over their heads financially, many times for reasons outside of their control. Given a bit of time, and proof that you are on the road to financial recovery, you’ll find that there are many lenders willing to give prospective borrowers with a bankruptcy on their record a mortgage at competitive interest rates.


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