Getting a Mortgage After Bankruptcy: How Long Do I Have to Wait?

Many people struggling with debt are worried that filing for bankruptcy will remain a black mark on their record forever, preventing them from ever obtaining a mortgage and purchasing a home. Thankfully, post-bankruptcy life is not so grim. You can get a mortgage after filing for bankruptcy and, depending on your circumstances, you may even be able to do so within just a few years. Continue reading to learn about how bankruptcy affects your credit and when you may be able to obtain a mortgage. If you are considering bankruptcy in the Hudson Valley, call a knowledgeable Poughkeepsie bankruptcy lawyer to explore your options for debt relief.

How Long Does Bankruptcy Affect Your Credit?

There’s no getting around it: Bankruptcy does lower your credit. That effect, however, does not last forever. The bankruptcy and related accounts will disappear from your credit report after a certain number of years.

If you filed for Chapter 7 bankruptcy, the bankruptcy will remain on your credit report for ten years following discharge. Individual debts covered by the bankruptcy will be listed as “included in bankruptcy” or “discharged” and show a balance of $0. Those individual accounts will disappear from your credit report either seven years from the date of your bankruptcy discharge or, if the accounts were already in arrears by the time you filed, seven years from the original delinquency date.

If you filed for Chapter 13 bankruptcy, the bankruptcy will remain on your credit report for seven years following discharge–meaning seven years after the end of the repayment period. As with a Chapter 7 bankruptcy, the individual accounts affected by the bankruptcy should fall off your report sooner, depending on when the accounts originally became delinquent.

When Can I Get a Mortgage After Bankruptcy?

Seven or ten years may seem like a very long time to wait to move on with your life. Luckily, you do not have to wait until the bankruptcy has fully disappeared from your credit report. Your credit score will be at its lowest right after the bankruptcy, but you can immediately start to rehabilitate your credit health. With proper financial planning and sensible decisions, you can start to build your credit back as early as the day after discharge. Taking steps such as obtaining a secured credit card and paying it off in full each month can do wonders for your credit score remarkably soon after obtaining a bankruptcy discharge.

Mortgage lenders will be aware of your bankruptcy, of course, and you might get a better rate if you wait until the bankruptcy is fully behind you. Many lenders are, however, willing to offer mortgages to otherwise qualified borrowers with a bankruptcy still on their record. Mortgage lenders will wait at least a few years after your bankruptcy to offer you a mortgage. For a conventional loan, you’ll typically need to wait at least four years.

Government-backed loans may be available even sooner. After a Chapter 7 bankruptcy, you could be eligible for a Federal Housing Administration (FHA) loan or Veterans Administration (VA) loan only two years after filing. For a United States Department of Agriculture (USDA) loan (available to low-income families in rural areas), you may be eligible three years after filing for bankruptcy. FHA, VA, and USDA loans might also be available as soon as one year after a Chapter 13 bankruptcy.

If you are struggling with debt in Orange, Ulster or Dutchess County, or anywhere in the Hudson Valley, contact the thorough and dedicated New York bankruptcy legal team at the Law Office of Taran M. Provost, PLLC for a free consultation on your case at 845-733-2720.