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How soon can I buy a home after bankruptcy?

If you would like to buy a home  Washington D.C. Buying a home after bankruptcyand are thinking about filing bankruptcy or have already filed, you should know that there are several loan options available to those that have filed for bankruptcy.

FHA Loans

If you’ve heard about FHA loans and are wondering whether your bankruptcy filing will disqualify you, here’s the answer!

People who have filed for bankruptcy could still quality for a FHA mortgage loan.  However, the Federal Housing Administration (FHA) has imposed certain waiting periods that apply to bankruptcy filers.

A FHA loans is a popular loan because it demands a lower down payment, and the loan requirements are easier to meet than the requirements of a conventional bank loan.  A FHA loan is a loan that is insured by the Federal Housing Administration. The FHA insures lenders against some of the risk associated with lending to those who do not qualify for a conventional loan because of lower income or other credit issues.

When can I qualify for a FHA Loan after bankruptcy?

It depends on the type of bankruptcy filed and the type of FHA loan. If you filed a Chapter 7 bankruptcy, then the waiting period begins to run on the date that the court orders the bankruptcy discharge.

FHA Back to Work Program Loan:

Under this program, a person that has filed for bankruptcy could qualify for a FHA loan in as little as 1 year from the date that the court orders the bankruptcy discharge.

The applicant must prove that he suffered an “Economic Event,” the FHA has defined this as: “An economic vent is any occurrence beyond the borrower’s control that results in loss of employment, loss of income, or a combination of both, which causes a reduction in the borrower’s household income of twenty (20) percent or more for a period of at least six (6) months.”

The borrower also has to demonstrate “Full Recovery” from the Economic Event, the FHA has defined this as: “The re-establishment of satisfactory credit…for a minimum of twelve (12) months.”

In addition, the borrower must prove that he has completed housing counseling. The borrower also has to prove that the bankruptcy filing was due to the economic event.

The effective day of this program is from August 15, 2013 through September 30, 2016.

To learn more about the Back to Work FHA program, go to www.hud.gov.

Conventional FHA Loan:

If you can’t qualify for a FHA loan under the Back to Work Program, then you could still try to qualify for a conventional FHA loan. The waiting period for those that have filed for bankruptcy depends on the type of bankruptcy filed.

Chapter 7 Bankruptcy

There’s a 2 year waiting period to apply for a FHA loan, and the waiting period starts to run starting on the date of the bankruptcy discharge. In order to qualify, a borrower must have established good credit since the bankruptcy, must meet the financial requirements, and must have job stability.

Chapter 13 Bankruptcy

A person currently in a chapter 13 bankruptcy is also able to apply for a FHA loan. The loan originator will evaluate the application based on timeliness and completeness of payments during the chapter 13 plan period of at least 1 year. In addition, the borrower must have established good credit since the bankruptcy filing, must meet the financial requirements, and must have job stability. Also, the bankruptcy trustee’s authorization will be required in order for the loan to be issued.

Foreclosure

If the person who filed for bankruptcy had a home foreclosed  on or given a deed-in-lieu of foreclosure in Washington D.C., Maryland, or any other state  then the waiting period to qualify for a FHA loan is three years.

Conventional Bank Loan

 

If you filed for bankruptcy, the conventional loan has the longest waiting period. The waiting period is 4 years from the date of discharge of the bankruptcy case. However, there are exceptions for extenuating circumstances. If you can prove extenuating circumstances then the waiting period will be 2 years from the date of the discharge of the bankruptcy case.

In order to determine the date that the court ordered your discharge or if you could qualify for a FHA loan, you should speak to your bankruptcy attorney.

You should contact a bankruptcy attorney If you are interested in buying a home in the Washington D.C. and Maryland area and are thinking of filing for bankruptcy.

Speak to an experienced Maryland and Washington D.C. Bankruptcy attorney before filing for bankruptcy.   A bankruptcy attorney will advice you if bankruptcy is a good option for you depending on your individual circumstances.

Washington D.C. bankruptcy attorney could give you advice on the effect that filing for bankruptcy will have in your ability to buy a home.  Ready learn more about the bankruptcy process?  Call 202-445-4775 or contact us for a consultation.