I will retire next year and plan on buying a home my credit score is low because of an chapter 13. What are my chances of buying a home?

Asked by Cecmar4, Terre Haute, IN Sun Jan 12, 2014

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Jennifer Far…, Mortgage Broker Or Lender, Noblesville, IN
Mon Jan 20, 2014
I have been a Mortgage Loan Originator for over 12 years now. I have closed many Mortgage Loans for borrowers that are currently in a Chapter 13 BK. As long as you have been in the Ch. 13 for at least one year and made all of your payments on time you may qualify. You will need the approval of your Trustee and that usually takes an extra week or two for the BK courts to process. You will also need to have re-established credit and a credit score of at least 620. The loan must close prior to your discharge.
If you wait until after your discharge, you will not be eligible for a minimum of two years after the discharge date. This doesn't seem fair, but the only reasoning that I have ever heard from an Underwriter is that while you are still in the Chapter 13 you are being guided by the Trustee and unable to make poor decisions concerning new credit. Not sure that that is really true either, but I can tell you that this rule is in the FHA Guidelines (HUD Handbook, 4155.1 4.C.2.h).
Please feel free to call me and I will be happy to take a closer look at obtaining a Mortgage pre-approval for you.

Jennifer Farmer
1st Signature Lending LLC
NMLS# 137597
0 votes
Thank you I have 11 months left on my chap 13 does this apply to VA loans also?
Flag Tue Jan 21, 2014
Tiff Atkinson, Agent, Indianapolis, IN
Mon Jan 13, 2014

Bankruptcy will need to be discharged for 2 years. Most lenders want your credit score to be 640. I work with lenders who will qualify you for lower. I recommend you start working with a lender sooner rather than later. You don't want to wait until next year and there be surprises on your credit.

Tiff Atkinson
Real Estate Broker
Carpenter Realtors
1 vote
Gwendolyn P…, Agent, Indianapolis, IN
Mon Jan 13, 2014
You can buy a house if you work at getting your credit score up to at least a 640 and your bankruptcy need to have been discharged for 2 years.
1 vote
Avery Garrett, Agent, Greenwood, IN
Wed Jan 15, 2014
Nobody will do anything with you while you are in a Chapter 13 simply because you could flip it to a Chapter 7, and then include the new debt with it. I have always thought doing a full chapter 7 bankruptcy was a better choice.

You would have to wait 2 years before you are eligible. However, during that 2 years you need to make sure that all negative accounts listed on the bankruptcy are taken off of your credit report, as this is not automatic. You will have to dispute each account, with all three credit bureaus, to get them off there.

Next, you need to build at least 3 solid credit accounts. One option is to get a couple of secured credit cards, and keep the balance on these to no higher than 30% of the credit limit. BMO Harris also has an option that will increase build your credit called Credit Builder CD. It is a great product for building credit.

Let me know if I can be of further assistance to you, your family, or friends.

Avery Garrett, Realtor
Coldwell Banker Kaiser
0 votes
Thank you,I will be done with the Chapter 13 this November and I want to know if the banks will deal with me with a large down payment from my 401k
Flag Wed Jan 15, 2014
Rodney Heard, Agent, Zionsville, IN
Mon Jan 13, 2014
You may be able to find a Lease/Option or do a land contract if you have enough down money.
0 votes
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