Both categories have subsets. They all require a specific waiting period after a bankruptcy filing. FHA loans are a good fit for first-time homebuyers and those with a less than perfect credit history who would have a harder time getting a conventional loan.
Some of the hallmarks of FHA loans include more liberal credit score requirements and lower down payments buyers can put down as little as 3. There is also a specific FHA rule which allows you to avoid the credit score requirement, meaning, you can qualify for an FHA loan even if you choose not to open any credit accounts after bankruptcy. For FHA loans, the waiting period is 2 years after your bankruptcy discharge. If, however, you are able to prove extenuating circumstances, you may qualify for the month exception.
USDA loans exist for borrowers who are interested in purchasing a home in a rural community. USDA loans offer low interest rates as well as a no down-payment option. Although you can qualify as soon as 12 months after your discharge if you can prove extenuating circumstances led to your bankruptcy filing.
VA loans are a benefit given to veterans. These can also have very favorable terms including no down payment and no minimum credit score requirement. You can be eligible for a VA loan 2 years after your bankruptcy so long as your credit is clean for that period. Conventional loans are private loans made by banks and mortgage companies without government backing. In order to be eligible for purchase by Fannie Mae or Freddie Mac, there are specific borrower guidelines.
Most conventional loans conform to follow these guidelines. Conventional loans usually require higher credits scores. The waiting period for conventional loans can vary from 2 - 4 years. Here, again, extenuating circumstances can reduce the waiting period to 24 months.
Fannie and Freddie define this as "nonrecurring events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. All of the above waiting periods can be impacted, and potentially increased, if your bankruptcy included a foreclosure. Proving extenuating circumstances can reduce the waiting period.
There are a number of steps you can take to improve your situation and build good credit immediately following your bankruptcy discharge. Your Chapter 7 bankruptcy will stay on your credit report for ten years with all three credit bureaus, but your score can start improving as early as your discharge date.
The other type of bankruptcy - Chapter 13 bankruptcy , stays on your credit report for only 7 years after filing bankruptcy. You should get in the practice of monitoring your credit report to make sure all the information is correct and be able to address any inaccuracies as quickly as possible. You should also set a reasonable budget for moving forward so that you are confident that you can maintain your ongoing living expenses. The more you are able to put away for this purchase the less you will need to borrow and the more favorable rates you will get with any mortgage.
That will tell you the appropriate purchase price range to look for and will give you an idea of what your monthly payment will be. Someone who knows the market, has good relationships with the lenders who might accept you, and who knows how to make your application look good. Make an enquiry to get matched with the perfect broker for you. When being considered for an ex-bankruptcy mortgage, lenders will want to see a clean credit history since you were declared bankrupt.
This will usually be a condition of your approval. You should make sure any outstanding debts are paid in full before starting your mortgage application.
Any new credit issues that have appeared since your bankruptcy such as Debt Management Plans or CCJs will make it a lot harder to get accepted for a mortgage. It's worth speaking to a specialist bankruptcy mortgage broker who can let you know what your options are. But there are a number of things you can do to improve your chances of getting mortgage after bankruptcy:. Generally, the longer it's been since you were discharged, the better you'll look to lenders.
Some lenders might approve you straight after discharge, but you'll have to meet strict criteria and pay higher interest. Waiting a few years - and keeping your credit report clean in that time - will greatly improve your chances. There are some simple ways to keep your credit file looking healthy. From correcting errors to registering to vote, it all counts towards building your score back up.
Make sure you're keeping on top of your bills and pay them on time. You'll look less risky to lenders if you can manage your income. Gathering paperwork that proves you understand your earnings, outgoings and budget will show you can live within your means. The fewer financial commitments you have, the better. Pay as much off your debt as you can. This will show a lender you won't struggle to make repayments.
Saving a bigger deposit means you're asking to borrow less money and making a bigger commitment. Most lenders ask people with previous bankruptcies to put down more money up front to reduce their risk. Though this depends how recently you were discharged.
When applying for a mortgage after bankruptcy, it's best to speak to an advisor who can assess your unique situation and explain your options. A specialist mortgage broker knows the market, which lenders are best for you, and how to give your application the best chance of being accepted. Make an enquiry to get matched to your perfect broker. We have first-hand experience of how your mental health can be affected when you get knocked back.
We're working hard to spread awareness and tackle the stigma that comes with bad credit issues. Life happens. There's many reasons why you might fall into bad credit, and while getting a mortgage after bankruptcy can be trickier compared to someone with perfect credit, that doesn't mean it's impossible.
Less processing, more understanding. Applying for a mortgage or understanding your options shouldn't be confusing, yet there are just so many myths doing the rounds and it's not easy to know where to turn to get the right advice.
Our calculators give you an idea of what you might be able to borrow, what's affordable and a rough estimate of the kind of property prices you can start to look at.
Gaining the independence and freedom to own and manage a property how you like, and eventually have an asset to enjoy in the future, is something many of us aspire to. However, if you have been made bankrupt you might be wondering how long after bankruptcy you will have to wait until you can get a mortgage. However, it can be done. This will ensure you can prove you are able to make repayments for credit products on time and in full.
Your bankruptcy will remain listed on your credit report for six years from the date you were made bankrupt. Even when it has been removed some mortgage lenders may still ask if you have been made bankrupt in the past — which you must answer truthfully.
This can impact your chances of getting a mortgage and so is something to bear in mind. It might be worth waiting until the bankruptcy has been removed from your credit report and you have had time to make an impact on increasing your credit rating.
Over time, it will naturally increase but taking on small amounts of credit and paying this off regularly and on time will help improve your rating. Our in-depth guide explains how to improve your credit rating to help you recover after bankruptcy. Brokers have access to all the lenders on the market and can get better deals when dealing with them directly.
They also know which lender is more likely to accept your application and will go to these first to avoid any hard credit checks, leaving marks on your report. Certain mortgage lenders specialise in lending to those with low credit ratings or poor credit history. However, it does indicate the longer you wait, the more likely it is you will be accepted with a lower deposit. This is because lenders may still consider you to be a risk and will want to receive a higher return on what they have loaned you to protect themselves.
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