BUYING A HOME AFTER BANKRUPTCY-YES YOU CAN!!!

One of the most frequently asked questions I get as a bankruptcy attorney is, when will I be eligible to purchase a new home and qualify for a mortgage after filing for a chapter 7 or a chapter 13 bankruptcy? I usually respond with telling them that the bankruptcies of today are not the bankruptcies of our parents and that qualifying for a mortgage after bankruptcy or a foreclosure, a short sale or a deed in lieu of foreclosure is possible as long as they follow a few simple strategies and meet the lenders criteria.

As the old saying goes,"time heals all wounds." This is very true with qualifying for a mortgage after filing bankruptcy. Once a bankruptcy discharge is granted in a chapter 7 bankruptcy or when a chapter 13 plan is complete the clock starts ticking for the debtor to rebuild credit. All lenders have certain criteria that an applicant must meet to qualify for a mortgage. I have attached a chart that explains this criteria.

	FHA	USDA	VA	Conventional
Bankruptcy Chapter 7	24 Months	36 Months	24 Months	48 Months
Bankruptcy Chapter 13	12 months has elapsed since the BK. Timely payments were made during Chapter 13 and permission was granted from court to enter into a new mortgage.	36 months from discharge or dismissal.	12 months has elapsed since the BK. Timely payments were made during Chapter 13, and written permission was obtained from court to enter into a new mortgage.	Extenuating circumstance 24 months from dismissal or discharge date.
Foreclosure	36 Months	36 Months	2 years, with exceptions on extenuating circumstances—can be less.	7 Years
Short Sale	36 Months	36 Months	2 years, with exceptions on extenuating circumstances—can be less	*2 years—80% LTV *4 years—90% LTV *7 years—can follow standard guidelines
Re-established Credit	3 trade lines open active for 24 months were paid as agreed. No derogatory accounts since the event. 12 month verified residential NO lates.	3 tradelines open active for 24 months paid as agreed. No derogatory accounts since the event. Must have a 24-month verifiable residential history NO lates.	3 trade lines open active for 24 months paid as agreed. No derogatory accounts since the event. 12 month verifiable residential NO lates.	3 trade lines open active for 24 months paid as agreed. No derogatory accounts since the event. 12 month verifiable residential history NO lates.

The most important step a debtor seeking a fresh start can do is to apply for and establish credit once a chapter 7 discharge is granted or a chapter 13 payment plan is completed. Credit is based on debt to income ratios and the beauty of a bankruptcy discharge is that nothing is chasing the debtor, the debt is gone! Establishing credit, no matter how small and keeping current on the payments for 24 to 36 months will do wonders for increasing your credit score. I had a client call me just the other day to tell me his credit score is now 814, he filed a chapter 7 bankruptcy two years ago. This brings great satisfaction to this bankruptcy attorney. A fresh start and a clean slate is truly possible.

If you are serious about qualifying for a mortgage I highly recommend that you speak with a mortgage broker who is familiar with the VA, FHA and the USDA mortgage programs available to home buyers.

Joseph W. Lehn, Esq. of Lehn Law, P.A. is a Port charlotte bankruptcy attorney who has offices in Sarasota and Port Charlotte.