No one wants to file bankruptcy, but hundreds of people in Atlanta each month find their way to bankruptcy court to receive a fresh start on their life.  Every client that comes into my office has a different set of circumstances that forced them into filing bankruptcy in Atlanta, and since most ask very poignant questions regarding life after bankruptcy, I figured it would be wise to make a blog post out of each major question under a “Life After Bankruptcy” Series.  The first question, and the one most often asked of me, is how soon after bankruptcy can I buy a house.  What this person really wants to know is how long it will take to qualify for a mortgage to finance the purchase of a house.

Fortunately for my readers, Steve Beecham, author of Bass-Ackward Business: The Power of Helping Others Without Hustling and Alpharetta mortgage-broker/owner of Home Town Mortgage (I highly recommend Steve’s services if you are looking for an honest, thoughtful individual to help you finance your next home) has agreed to share his insight into qualifying for a mortgage after bankruptcy:

Qualifying for an FHA Loan After Bankruptcy

A credit report will be obtained on the borrower and any late payments, collections, judgments, foreclosures, bankruptcies, etc. must have a justifiable explanation in writing by the borrower.

In the event of a foreclosure, the borrower has three years from the date the claim was paid until he/she is eligible for another FHA loan, unless the foreclosure was the result of extenuating circumstances beyond the borrower’s control and the borrower has since established good credit.

Chapter 7 bankruptcy requires the borrower to wait at least two years from the date of discharge.

Chapter 13 bankruptcy requires the borrower to have been paying on the bankruptcy for at least one year, performance must have been satisfactory and the borrower must also receive court approval to enter into the mortgage transaction.

Fannie Mae Bankruptcy Waiting Period

Chapter 7: The standard waiting period to obtain a new Fannie Mae loan after an Atlanta Chapter 7 bankruptcy is four years and is measured from the discharge or dismissal date of the bankruptcy action. If you can document that a significant change in circumstances beyond your control forced you to file bankruptcy, the waiting period could be reduced to as little as two years.

Chapter 13: The waiting period for a Chapter 13 bankruptcy depends on whether the bankruptcy was discharged (you have made all payments under your Chapter 13 Plan and all your unsecured debts have been wiped out) or dismissed (you failed to make payments or perform certain duties required by the Trustee). If your Chapter 13 was discharged, your waiting period is two years. If it was dismissed, the wait will be four years. Fannie Mae guidelines allow for a reduction of the waiting period for dismissals to two years if significant extenuating circumstances beyond your control led to the bankruptcy and can be documented. There is no waiting period reduction for discharges.

Multiple bankruptcies: If you have filed for bankruptcy multiple times in the last 7 – 10 years, your waiting period is 5 years from the most recent dismissal or discharge date. The waiting period may be reduced to 3 years if certain exigent circumstances forced you to file.

This information is just the norm.  There may be debtors who can qualify for a mortgage after a Chapter 7 within two years, depending on the income level and credit score.  I have also seen Chapter 13 debtors who regularly made their mortgage payments on their home qualify for a mortgage within 2 months of receiving a Chapter 13 discharge.