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How do you Qualify for a Mortgage after Chapter 13 Bankruptcy?

January 10th, 2020 by usdaadmin

After filing for Chapter 13 bankruptcy, many feel homeownership is a dream that is out of their reach. However, in today’s video, I’ll explain how you CAN qualify for a mortgage after Chapter 13 bankruptcy.

In fact, with USDA, FHA, VA, or Conventional loans, Chapter 13 bankruptcy can be more flexible than Chapter 7.  Watch the video below, as I explain the differences and qualifying advantages between each program side by side.

Chapter 7 vs Chapter 13

First, let’s review the difference between Chapter 7 and Chapter 13 bankruptcy because the type of bankruptcy impacts your future mortgage qualifying process.

  • Chapter 7: You ask the bankruptcy court to discharge most of the debt you owe.
  • Chapter 13: You file a repayment plan with the bankruptcy court to pay back all or a portion of your debts over time.

How soon can you qualify for a mortgage after a Chapter 13 Bankruptcy?

 Chapter 13 Bankruptcy

Once a Chapter 13 bankruptcy has been discharged it’s possible to qualify for a mortgage, but waiting periods vary depending on the mortgage type. Additionally, because of the required repayment period, underwriting guidelines are more flexible with how soon a potential buyer can qualify after discharge.

Here are the standard Chapter 13 bankruptcy qualifying guidelines:

  • Conventional loans under Fannie Mae require a 2 years waiting period from the discharge date.
  • USDA, FHA, and VA Loans will allow financing immediately upon completion of the Chapter 13 repayment plan. This means there is no additional waiting period after the discharge date!

USDA Underwriting Flexibility

When trying to qualify for a USDA loan after Chapter 13 bankruptcy, we have more underwriting flexibility with waiting periods after your discharge has been completed.  It is even possible to qualify for a USDA loan while you are still in the bankruptcy repayment plan!

 Chapter 13 Bankruptcy

It’s possible to qualify for a USDA loan while in Chapter 13 repayment if the following conditions are met:

  1. You are at least 12 months into the plan; and
  2. There have been no late payments; and
  3. The borrower receives written permission from the Bankruptcy Court or Trustee to enter into a mortgage application through a motion to incur debt.

Please note, due to the short time allowed for mortgage qualifying after completion of a Chapter 13 bankruptcy, more stringent manual underwriting guidelines may apply.  An additional review will be needed to determine a homeowner’s eligibility.

Qualifying after Chapter 13 Bankruptcy

We realize that qualifying for a mortgage after a Chapter 13 bankruptcy can be complicated, but that’s where my team can step in. Metroplex is built to walk homebuyers through the qualifying process step by step.

We are able to offer specific experience and expertise on how to qualify for a mortgage after a bankruptcy. Please call or email with any questions or scenarios you may have.

Call: (800)806-9836 Ext. 280

Make it a great day, and I look forward to seeing you next week!

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