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Getting a Home Mortgage After Bankruptcy: What You Need to Know

If you’ve filed for bankruptcy, if you are making payments to your Chapter 13 bankruptcy, or your bankruptcy has been discharged, you may be wondering what it means for your ability to get a home mortgage. Fortunately, it’s still very possible to get a mortgage after bankruptcy with the right preparation and knowledge. Knowing what to expect and how to prepare can help you make sound decisions during the mortgage process. In this article, I will explain the steps you need to take in order to get a home mortgage after bankruptcy. We’ll discuss everything from improving your credit score to getting pre-approved and finding the right lender. With the right preparation and guidance, you can be well on your way to getting a home mortgage after bankruptcy, possibly during your bankruptcy! 

Understanding the Mortgage Process After Bankruptcy

When you file for bankruptcy, your ability to get a mortgage is greatly limited. Bankruptcy is specifically designed to allow a debtor to reorganize and get back on their feet financially. It’s intended to be a temporary fix, not a permanent solution. Like any legal process, bankruptcy’s main goal is to allow you to get your financial house in order and put your financial life back in order. Making the effort to get a mortgage after bankruptcy is a great way to get back on track. After bankruptcy, your credit is seen as “damaged” by mortgage lenders, mortgage guidelines, and Underwriters. Credit scores and credit history are used by lenders to determine your ability to be approved, your interest rate and mortgage products. An overly low credit score can lead to higher interest rates, higher monthly payments, and possibly not being able to be approved for a mortgage. Before you begin the mortgage process, you should look at and analyze your credit score and credit make up. Lenders are going to be looking to see if you have re-established credit, really, lenders will want to see that you have current trade lines with some history of repayment. Lenders will want to see how you are handling that credit after your bankruptcy, keeping your balances low, and ensuring no accounts are reporting late payments. 


How long do I have to wait after Bankruptcy to get approved for a mortgage

Every mortgage program has their own guidelines and rules for how long you have to wait before you can be pre-approved for a mortgage. Why do you have to wait? When I was a mortgage underwriter I was told that we don’t care that a borrower had to have a bankruptcy to improve their financial situation, we care about whether they learned from having to have that bankruptcy. Time allows for Underwriters to make that decision as to how you are and will handle your credit.  

How long you have to wait will depend on what bankruptcy you have used or you are currently in, Chapter 7 or Chapter 13 bankruptcy.  

For a Chapter 7 bankruptcy you will have to wait from 2 to 4 years from the DISCHARGE DATE depending on the mortgage program, FHA and VA mortgages requires a 2 year wait, the USDA mortgage programs requires a 3 year wait, and for the most part both Conventional mortgage programs require a 4 year wait. 

Of the two Conventional mortgage programs Freddie Mac is a bit more lenient. If your bankruptcy is reflected on your credit report and we get an automated underwriting approval then there is no waiting period.  

For a Chapter 13 Bankruptcy, it gets very interesting. You will need to wait 12 months from your FILING DATE for FHA, VA, and USDA as long as you have made your last 12 bankruptcy payments in full and on time. Making it possible to get a mortgage approval while you are still paying on your Chapter 13 bankruptcy. 

Also, we will need to get permission from the Court to allow you to get a new home and mortgage.

 With a Conventional mortgage, it is a 2 year wait from the discharge date or 4 years from the dismissal date.  

Getting Pre-Approved For a Mortgage after bankruptcy.

Once you have examined your credit scores, you want your scores to be in the 600 credit score range especially if you are considering FHA or VA. If you want to consider USDA or Conventional you will want your scores to be nearer to 640. The credit scores you will need will depend on the lender and their overlays to the guidelines and the mortgage program. Once you are sure you have re-established your credit and there are no late payments on this credit, and you have cleaned up any mistakes on your credit report, you are ready to get pre-approved for a mortgage. Pre-approvals can be beneficial for a number of reasons. It gives you an idea of your likely mortgage payment, which is helpful for budgeting. Being pre-approved will allow you to know how much of a sales price you should be considering. Being pre-approved will simply provide you with peace of mind. It also lets your real estate agent and the seller know that you’re likely able to get financing, which can help speed up the home buying process. Pre-approval gives you an advantage over other borrowers.  

Calculating Your Mortgage Payments

Now that you know what to expect and what documents to assemble, it’s time to figure out what your monthly mortgage payment will be. This is a critical part of the mortgage process and will have a big impact on your loan terms and amount. Your monthly payment is based on a number of factors, including the amount of your loan amount, loan interest rate, and loan term. To figure out your loan payment, you’ll need to consider all these factors and make a realistic estimate. The good news is there are a number of ways to estimate your payments. You can use a mortgage calculator, discuss it with a lender, or simply make an educated guess. It’s important to use a realistic method and not over-inflate your payment estimate. 

Know your budget and have a total house payment in mind that works within your budget. Know what that maximum house payment is that you will not go a dollar over, this will help you and your loan officer establish the maximum sales price that you can be approved for and still not be house poor.  

Understanding Mortgage Insurance Requirements

In some cases, lenders may require you to obtain mortgage insurance. This insurance protects the lender in case the borrower doesn’t repay the loan. It comes with a cost, which is included in your monthly payment amount. Although it may be required by your lender, you should still carefully consider this additional cost before choosing to obtain mortgage insurance. Mortgage insurance is designed to protect lenders in the event of a loan default. A loan without this insurance would result in a lower monthly payment amount. However, it’s important to note that the insurance is only payable if you’re late on your payments. 

Finding the Right Lender

Finding the right lender is crucial in the process of getting a mortgage after bankruptcy. There are a number of factors to consider when choosing your lender, including their mortgage knowledge and experience, ease of loan application process, can they do manual underwriting, and do they have any guideline overlays. Make sure to look around and ask a lot of questions. You may be able to find better options and interest rates as you look for the right mortgage lender. Once you’ve found a lender that you’re comfortable working with, make sure to clearly communicate your needs. Know what you’re looking for, including how much you’re willing to borrow, how much you’re able to put down, and what type of loan you’d like to use. If you’re unable to fully explain your needs, a lender may push you towards a loan that isn’t a good fit. A home buyer that does their HOME WORK will be appreciated by the mortgage loan officer they work with.  

Assembling the Right Documents

Before and after the mortgage pre-approval you will be asked for your filed bankruptcy documents, all pages. If your bankruptcy has been discharged you will be required to provide the Discharge Letter provided from the court.  

If you are in the midst of paying your Chapter 13 you will be asked to get a letter from the Trustee involved for permission for you to purchase a new home. Also, you will be asked to document that you have made the most recent 12 or more payments to the court on time.

 These documents and then the standard documents for a mortgage pre-approval application, that will include paycheck stubs, W2 or 1099 forms, bank statements, and possibly tax returns. Your loan officer will know what they want and need. 

Working With a Real Estate Agent

When you’ve finished the mortgage process and have your loan documents in order, it’s time to find a new home. This is a crucial step in the process and can have a big impact on your next new home. Hiring a real estate agent to be your buyer’s agent will allow you to shop around and compare homes. You can also use their expertise and contacts to help you find the perfect new home. Hiring a real estate agent can be beneficial for a number of reasons. They can help you navigate the home buying process, make comparisons between houses, and help you find the perfect home on your budget. They can also help you negotiate on prices, concessions, and get the best deal possible. 

Final Steps to Getting Your Home Mortgage After Bankruptcy

Congratulations! You’ve completed the mortgage pre-approval process and are ready to find your new home. As you finalize the purchase, make sure to include all these steps in your mortgage closing checklist. - Get a home inspection. The home inspection is helpful for identifying potential problems with the home, and save you from making costly decisions. - Get your home insurance policy in place. Make sure to have your homeowners insurance in place before closing on your new home. Get quotes as home owner’s insurance can vary a lot between insurers. Start with the insurer that has your car insurance as they will offer a multi-policy discount. Once you have found the best quote, put it into place. Get your mortgage documents to your mortgage lender as soon as possible. The more you are ready the faster you can close on your next new home.

Getting Your Home Mortgage After Bankruptcy, wrapping it up.

You have gone through or you are currently in a bankruptcy? Are you looking to purchase a new home? Don't let bankruptcy stand in the way of realizing your dream of home ownership. With the right guidance, you should be able to get a mortgage after or during bankruptcy. I specialize in helping home buyers who are in Chapter 13 or have had a bankruptcy discharged get a mortgage sooner. I can help you can get the home of your dreams without having to wait years after bankruptcy. Take the first step today and contact me to find out how you can get a mortgage after or during bankruptcy. I will guide you every step of the way towards a new home and a brighter financial future. 

If you want to make an appointment to talk here is a link to my calendar where you can schedule a convenient time to talk, If you would like to learn more follow this link to my website to learn a lot more,

Posted by Bob Rutledge on February 6th, 2023 4:37 PM
Your Credit Score is one of the most valuable assets a person can possess, especially if you are considering financing a new home. Your credit score will determine if you can be qualified for a mortgage, it will determine your interest rate, it will determine your closing costs, it will determine what mortgage program, and more. If you would like help with your down payment it will determine if you qualify for a DPA program too. 

The credit score is not the only item in making determinations regarding a mortgage application but it is where every lender starts. It is very important.

What is a low credit score? The average credit score in the United States ranges between 673 and 695 depending on who is supplying the credit score, so let's call the average credit score 684. The average credit score for a conventional closed mortgage application is over 700. Recently FHA/HUD made adjustments to their automated underwriting guidelines making it more difficult for borrowers with low credit scores and a high debt to income ratio to get an automated approval and the main reason was because their average credit score dropped below 680.

So, what is a low credit score? For a conventional mortgage anything really under a 660 score, unless you are utilizing the Home Ready or Home Possible programs and then it is a little lower. With FHA I use to say 580 or higher and you would be fine, but now a low credit score for FHA is going to be nearer to 620 unless your debt ratio is well managed.

FHA allows for credit scores down to 500 but if you fall below 580 it is an automatic required 10% down payment instead of the common 3.5% required down payment for FHA. Credit score does matter with FHA!

Can you get approved for a mortgage with a low credit score between 580 to 620, yes, absolutely. FHA recently made it more difficult to get approved but it is possible still. Besides FHA you only have the VA mortgage, for qualified Veteran, for low to poor credit scores. I am starting to see some Non-QM mortgage programs for low to poor credit borrowers but the down payment is huge and the qualification guidelines are very difficult.

How do you get approved for a mortgage if your scores are low to poor, low being 580 to 620 and poor from 560 to 580? I include the high side of poor because sometimes a minor tweak to a 560 score can kick the score up to 620 or higher.

Your first step to a mortgage approval with a low credit score is to find a mortgage loan officer that is willing and capable of working with you. Not all lenders are wiling or have the knowledge, ability, and experience to help you. 

In many instances a low credit score is only a minor tweak away from becoming exactly what you need to get approved, get a better interest rate, qualify for down payment assistance, purchase a new home with little to nothing out of pocket, qualify for the house you want, and all the extra benefits that come with a higher credit score.

With my low credit score borrowers I utilize my Credit Score Rescue Program to help increase credit scores very quickly. If done well and properly you can see credit score improvements within 2 to 4 weeks! When we pull a credit report generally we get the credit history, current credit trade lines, and the scores, with the Credit Score Rescue Program we also receive the POTENTIAL CREDIT SCORES.

Your potential credit scores come from the 3 credit bureaus, TransUnion, Equifax, and Experian and it is their factual feedback as to what your scores can be within 30 days of execution of specific action steps. If the scores you have are too low for what we want or need but your potential scores provide you with a better situation then we will order from the 3 bureaus your Action Plan to higher scores. 

The Action Plan will tell us exactly how to get the biggest bang for your investment into improving your credit score. But, it also allows us to play with the Action Plan to possibly reduce the investment needed to get that BIG BANG results to a more affordable option to get us exactly what is needed. 

The Credit Score Rescue Plan is something I have not experienced in over 2 decades as a mortgage loan officer. I now work with a lot of new home buyers that were turned down previously by other lenders, thought their credit too low to own a home, or we simply used the program to help improve the mortgage application. Learn more about the Credit Score Rescue Program.

HOME BUYER TIP: if your scores are low and you are wanting to purchase a new home and are working on your credit scores, STOP! I see it too often that the DIY work of future home buyers has hurt them because they have done the wrong right thing. Let someone like me help and consult with you, BTW, paying off collections can actually hurt your credits scores, (hint). Want More Tips about LOW CREDIT SCORE APPROVAL?

I can and want to help you qualified for a mortgage for your next new home! Go to my website at at my website you will find more help and how to reach me. Would you like to SCHEDULE an APPOINTMENT to ask questions, get advice, or to get pre-qualified, I would welcome to hearing from you.

My name is Bob Rutledge and I have been a Mortgage Loan Officer in the St. Louis MO area for over 2 decades. I specialize in first time home buyers, renovation mortgages, and helping home buyers with low credit scores improve and strengthen their home buying position.

Posted by Bob Rutledge on May 15th, 2019 10:13 AM

Did you know that FHA allows for credit scores down to a 500 score? Then why are you hearing from other lenders that they can't help you unless you have a 640 credit score? Because of their own overlays to the FHA underwriting guidelines or because the mortgage loan officer has no ability, knowledge, experience, or mostly they just don't want to mess with it.

I have been a mortgage loan officer and/or FHA underwriter since 1996 and every month it seems that I am helping new home buyers who were turned down, turned away, or thought they could not qualify.  

Did you know that FHA provides a list of compensating factors that you as a borrower can bring to the application to off-set the bad credit items. Go to my website at and under TIPS and TOOLS you will find everything you need to know about compensating factors......I would bet that you already have one or two compensating factors to improve your situation, and that is normally enough to get you approved.

Did you know that there is a FORMULA to approve borrowers if the automated underwriting system turns down your application. With most lenders when the 'machine' turns you down that's the end, they have no ability to have a real human Underwriter review your application and apply a common sense approach to you and your circumstances.

FHA came out with a formula that tells the Underwriter that if you match up to what the formula asks for in regards to your exact situation then you are an automatic approval. That's right, an automatic manual underwriting approval! Want to learn more about the Formula? CLICK HERE

I know that we have all heard that it so difficult to get a mortgage today and especially so if your credit is less then perfect, it can be if YOU are not doing your homework ahead of time. Go to and do your homework now so that you can purchase your next new home now or soon.

Then contact me, I want to help, I want to be there from the start to the end, I want to see you closing on your next new home.

Posted by Bob Rutledge on March 4th, 2016 9:21 AM


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