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How to Buy a House After Filing for Bankruptcy

If you are wondering if you can buy a home after filing bankruptcy, the short answer is yes. However, there are added complexities such as required waiting periods after bankruptcy before you may purchase a house, and dependencies based on the type of bankruptcy you have filed and your credit score.

How Soon After Bankruptcy Can You Buy a House?

Depending on the type of bankruptcy you filed and the type of mortgage you seek, the average waiting period before you are eligible for a mortgage is 1 to 4 years.

In addition to a waiting period, you will need a judge to discharge your case before you can get a mortgage. Having your bankruptcy discharged does not mean it is erased. Instead, it means that you have repaid all remaining debts according to your debt discharge agreement. Dismissal is another option for judges, but this is looked at more unfavorably.

Another consideration is your credit report. If you have not worked to boost your score, this can also delay your ability to qualify for a mortgage.

Bankruptcy is designed to get someone out from under crippling debt and give them a fresh start, but there are repercussions. Your bankruptcy sits on your credit report for several years, your credit score drops significantly, and lenders might be less likely to give you a loan. Lenders that do provide you with a loan will likely charge you a significantly higher interest rate.

All of these factors can play into the timeline from bankruptcy to home purchase, but the biggest factor is which type of bankruptcy you filed.

Chapter 7 Bankruptcy

Chapter 7 is the most common type of bankruptcy. It discharges most of your unsecured debts, but has a bigger negative impact on your credit score and stays on your report for 10 years.

Once your case is discharged, there is a waiting time called a “seasoning period” of up to 4 years for a conventional home loan. If you are considering a USDA loan, then you may only have to wait three years, while VA or FHA loans require only two years of seasoning. Under certain extenuating circumstances, such as situations beyond your control like prolonged strikes, the timing to acquire a loan after Chapter 7 bankruptcy could be even less.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is considered a reorganization of debt, which means you are still making payments, so your credit score is not as negatively impacted. This type of bankruptcy appears on your record for 7 years.

Payment plans for Chapter 13 bankruptcy are scheduled to last between 3 to 5 years. Making the payments regularly and in full is critical to getting your credit score back up, getting the judge to discharge the case, and hopefully qualifying for a mortgage.

Luckily, many mortgage companies are willing to give you a mortgage even when you are still in the Chapter 13 repayment period as long as you can prove that you can afford the additional expense. Mortgage companies will look at your total debt as a percentage of your total monthly income to determine whether or not you are eligible for a loan.

When it comes to a conventional loan, they are a bit tougher and require a longer waiting period. A period of 4 years from the date you filed for the claim is typical, or two years from the date it was discharged.

However, those seeking a USDA, FHA, or VA loan experience different waiting periods. The USDA loan will require you to wait one year from the date of filing. A VA loan can be acquired immediately if you have finished all payments or have made a year’s worth of payments. An FHA loan can be pursued in under two years from the date the case number was assigned, but additional criteria include making 12 months of on-time payments, having the court must grant permission to pursue a mortgage, and explaining how your current situation will not lead back to bankruptcy.

Multiple Bankruptcy Cases

If you have filed multiple bankruptcy cases, especially if you have filed more than once in 7 years, your waiting period is bumped out to 5 years. If you can prove extenuating circumstances, like a medical emergency, the waiting period can be cut to 3 years, though this is not guaranteed.

What Type of Mortgage Can You Get After Bankruptcy?

The main types of mortgages have different features and restrictions after a bankruptcy.

Conventional Loan

A conventional loan is a loan that meets the requirements of Fannie Mae and Freddie Mac, which are government entities that purchase mortgages from lenders. There are many companies that offer conventional loans, but they are stricter when it comes to mortgages after bankruptcies because they have more at risk.

FHA Loan

An FHA loan comes from the Federal Housing Administration, and it is designed to help low-to-moderate-income families buy a home. This is usually a good path if you have filed for bankruptcy because the criteria to be approved for an FHA mortgage are less rigorous than conventional mortgage regulations. You will still need to wait out the seasoning period, have an eligible credit score, and will need a down payment.

VA Loans

A VA loan is provided through the U.S. Department of Veterans Affairs and is only available to veterans, service members, and their surviving spouses. These loans are more lenient with a shorter waiting period. They also require a smaller down payment or no down payment at all in some cases.

USDA Loans

A USDA loan is for people who are rural homebuyers and requires no down payment. These loans are sponsored by the U.S. Department of Agriculture and are designed to support people with lower incomes. If this fits your situation and you file for Chapter 13 bankruptcy, the waiting period is often waived.

Non-qualifying Mortgage

A non-qualifying mortgage is set up for people who do not meet the standard criteria of a traditional mortgage. If you have filed for bankruptcy, this could be a good option because it is less strict. However, you will still need a good credit score, and be prepared for higher interest rates and larger down payments.

How to Apply for a Mortgage After Bankruptcy

Once you apply for bankruptcy, you are getting a chance to start over and rebuild your finances. There are some steps you will need to take if you want to own a home. These steps can open the door to a mortgage and other loans.

Credit Repair

One of your first steps is credit repair. Immediately start to rebuild your credit score by budgeting so you can cut spending and debt, and consistently make payments on time. This can work quickly toward boosting your score and establishing a good credit history.

This is important when it comes to a mortgage because many lenders have minimum credit score requirements, and high credit scores typically result in lower interest rates for the borrower.

Letter of Explanation

The next step is outlining what caused your bankruptcy in a letter of explanation. Even if it was caused by irresponsible spending habits, understanding this and proving that you are making a change bodes well for your future ability to get a loan. If there were extenuating circumstances and your bankruptcy was out of your control, this is worth noting. Your letter of explanation should include the following:

  • Date of bankruptcy
  • Type of bankruptcy
  • Reason for filing (with explanation and evidence, if possible)
  • Explanation of changed circumstances since bankruptcy
  • Proof of improved financial habits
  • Explanation of how you are now better able to handle a mortgage


Getting preapproved by a lender before home shopping can save a lot of time and put you in a better spot to make a home purchase.

Most lenders require a certain credit score, and some might require proof of down payment money before they grant preapproval. Ask your prospective lender what they need to give you a pre-approval letter, but you can start by gathering the following:

  • Social security card
  • W-2, 1099, or similar tax forms for the last two years
  • Pay stubs from the last 30 days
  • Tax returns for the previous two years
  • Two most recent bank and investment statements
  • Bankruptcy documents
  • Your Letter of Explanation with proof of any extenuating circumstances

Improving Your Chances of Buying a Home After Bankruptcy

If you have filed for bankruptcy and want to purchase a home, then it is time to be proactive and start preparing for a home purchase. Here are a handful of ways to increase your chances:

  • Pay your bills on time and in full. This helps to establish a favorable credit history. Do not skip any payments.
  • Keep tabs on your credit score to ensure there is no suspicious activity. Check your credit score and credit reports. Dispute any inaccuracies in your credit reports.
  • Don’t take on new, unsecured debt. Do not put your credit score at risk. If you need new credit, such as for a vehicle, have someone co-sign to help you build credit through that loan.
  • Improve your spending habits overall. You may find it helpful to track your income and expenses, or to get a secure line of credit to prevent slipping and to build your credit history.
  • Start saving for a down payment. Most likely, putting down a larger down payment will make lenders more favorable to offering you a mortgage after bankruptcy.

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