Home Buying in 59105>Question Details

Justadream, Home Buyer in 59105

how long after you file bankruptcy can you start looking for a home? does it hurt your chances that bad?

Asked by Justadream, 59105 Thu Jul 14, 2011

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3
Wsre Wsre’s answer
First, any bankruptcy must be "discharged" by the court. You also cannot be in any "Credit Counseling" or other programs that take over your finances. The lender is looking to meet several criteria. Debt to Income ratio, Stability and time on the job. Money in the Bank and bounced check history.Any Retirement or 401 K assets. In America money solves all problems. A big down payment means business.
0 votes Thank Flag Link Tue Nov 8, 2011
If it was a Ch 7...

• FHA requires 2-years BK discharge (only 1 year if it was due to extenuating circumstances, such as medical or death of a wage earner, etc.)
• VA requires 2-years BK discharge
• USDA requires 3-years BK discharge (only 1 year for extenuating circumstances)
• Fannie Mae & Freddie Mac require 4 years (only 2 years for extenuating circumstances)

If it was a Ch 13...

• You can be still *in* a Ch 13 BK with FHA or VA financing, it is just required that:
- one year of the pay-out period under the bankruptcy has elapsed
- the borrower's payment performance has been satisfactory and all required payments have been made on time, and
- the borrower has received written permission from bankruptcy court to enter into the mortgage transaction.
• If it was a dismissed BK then 2 years from the dismissal date for FHA or VA financing
• USDA requires 3-years BK discharge (only 1 year for extenuating circumstances - however there are lenders who will use the Ch 13 BK filing date for this seasoning requirement - each USDA lender has a slightly different take)
• Fannie Mae & Freddie Mac require 2 years from discharge date & 4 years from dismissal date (2 years from dismissal with extenuating circumstances)

In all situations you need at least 12 months of re-established credit and 3 traditional trade lines, some lenders want 3 trade lines of 12 months each. Trade lines that survived a BK, such as a credit card you kept open, a car loan you maintained payments on/didn't include, student loans that you are making payments on that couldn't be included, etc. can count towards the re-established credit.

Other than medical collections that can be properly explained, if there are any late payments or delinquent accounts (collections, charge-offs, judgments, tax liens) after the BK or foreclosure then the time seasoning often starts over again from the latest late payment/delinquent mark (underwriter's discretion). Having a verifiable on time housing payment history goes a long way to making an underwriter feel comfortable, as well as taking a pre-purchase housing counseling class with a budgeting/financial model. Practically anything you can do to prove that you have made & kept a vow to make all payments on time will be helpful.
0 votes Thank Flag Link Fri Jul 15, 2011
Depends, was the bankruptcy discharged...generally it can take two years, but much will depend on your financials, credit score, downpayment amount, etc.
0 votes Thank Flag Link Thu Jul 14, 2011
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