How Long Do I Have To Wait to Buy a Home After Bankruptcy?

There are a lot of myths, misconceptions, rumors, and exaggerations out there about bankruptcy – and even some purposeful misinformation.

This can lead to a lot of confusion and skepticism about what is, at its core, a method that many individuals and businesses can use to hit refresh on their finances, letting them take a breath, get out from under debts, rebuild their credit, and move forward to a more secure and productive future.

One area where many people have questions? Homeownership. Specifically, many people tend to (rightly) believe that these two things are deeply related. But where many people start to go off track is when they ask a question along the lines of:

“Doesn’t bankruptcy destroy my credit? Won’t it basically be impossible to buy a house after declaring bankruptcy?”

This is a common belief, but it’s a little misguided. Let’s dig into the facts.

Unfortunately, declaring bankruptcy will affect your ability to buy a home. After bankruptcy, you’ll need to wait a certain period of time in order to buy property. But, on the flip side, many people tend to overestimate how long it might take. In many cases, you won’t need to put your dreams of owning a home up on the shelf and wait forever and a day to get there.

Instead, many consumers will be able to close on a home loan just a few years, or less, after declaring bankruptcy. Of course, there are many different factors at play, and everyone’s case will be a little bit different.

Chapter 13 and Chapter 7

Generally speaking, buyers may be eligible to secure a conventional home loan four years after the discharge of a Chapter 7 bankruptcy action. For many buyers, though, this “seasoning period” may be even shorter. With FHA or VA financing, for example, many homebuyers may be able to secure a loan two years after discharge.

With Chapter 13 bankruptcy, consumers may be able to secure financing two years after discharge. Consumers may even be able to secure FHA or VA financing as little as a year later (or less), provided that they can provide records of on-time payments and secure permission from a court to take on new debt.

Now, there are a few other things to keep in mind. For one thing, different mortgage lenders will have different standards and policies, creating additional requirements on top of what comes along with bankruptcy. Bear in mind that homebuyers looking for financing should be ready to do a significant amount of research, comparing different lenders and mortgage brokers, and looking into loan and down payment assistance options on the state and local level.

Even more importantly, consumers interested in purchasing a home after bankruptcy need to remember what it will take to get there. These seasoning periods are there for a reason.

After bankruptcy, individuals have a unique opportunity to get something of a fresh start, and should take advantage of that – particularly if they want buying a home to be on the horizon. While every case is different, many consumers are going to need this time to rebuild their credit score, contribute to their savings, and generally take steps toward building a healthy financial future.

Looking for Guidance

While bankruptcy is typically regarded as a last resort, bankruptcy laws actually offer individuals, couples, business owners, and corporations numerous ways to get financial relief and reorganization they need to get their credit and their lives back on track.

With that said, though, it’s important to realize that this process can be complex and emotionally trying – and that what comes immediately after bankruptcy can have a huge and lasting impact on your financial future.

While it is not strictly required to bring on an attorney for bankruptcy matters in the state of Illinois, many consumers will find that this process is made easier – and, ultimately, more helpful in the long term – with the assistance of an experienced legal professional.

At Gunderson Law Firm, we strive to protect our clients’ assets to the full extent allowed by today’s laws throughout the complex bankruptcy process, helping them get the debt relief they not only need, but genuinely deserve.

Moving through the bankruptcy process, we can also counsel you on realistic ways to avoid serious debt issues in the future. Whether you are a business owner, a wage earner, retired, or otherwise, we can address your specific situation with strategic plans to help put severe indebtedness behind you so you can enjoy life again.

Looking for a second chance? Interested in learning more about bankruptcy and realistic financial planning as a way to leave debt in the past? Drop us a line or give us a call today to get the conversation started.

2018-08-21T12:15:05+00:00 August 21st, 2018|Community|