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How does a Chapter 7 Bankruptcy impact my ability to qualify for a USDA, FHA, VA, or Conventional loan?

November 22nd, 2019 by Sean Stephens

How soon can you qualify for a mortgage after Chapter 7 bankruptcy?

According to statistics released by the Administrative Office of the U.S. Courts, from 2015-2019 there have been over 2.5 million Chapter 7 Bankruptcies filed. However, even with a previous Chapter 7 Bankruptcy, you can still qualify for a mortgage after a specified waiting period.

Waiting periods differ between USDA, FHA, VA, and Conventional loan programs and in today’s video, I’ll compare them side by side.

Chapter 7 Bankruptcy

How soon can you qualify for a mortgage after Chapter 7 bankruptcy in Florida?

In many cases, a Chapter 7 bankruptcy can happen outside of the homeowner’s control such as a major illness, divorce, or death of a spouse.

A home buyer who previously filed for bankruptcy and is once again trying to qualify for a mortgage is sometimes called a Boomerang Buyer. These Boomerang Buyers are still a large and valuable portion of the home buying market.

With that being said, once a Chapter 7 Bankruptcy has been discharged, waiting periods will apply and determine how quickly you can qualify for a mortgage.

Waiting Periods for Chapter 7 Bankruptcy

Currently, the published Chapter 7 Bankruptcy qualifying guidelines for USDA, FHA, VA, and conventional are as follows:

VA Loans

  • VA Loans are the most lenient.
  • They allow for 2 years after a bankruptcy discharge.

Florida USDA Loans after Bankruptcy

USDA Loans

  • USDA Loans require 3 years after a bankruptcy discharge.
  • However, exceptions can be possible.
  • My office has successfully processed and closed the USDA waiting period exceptions.

Conventional Loans

  • Conventional Loans under Fannie Mae and Freddie Mac have a 4 year waiting period for mortgage qualifying after a bankruptcy discharge.

FHA Loans

  • FHA loans have a 2 year waiting period after a bankruptcy discharge.
  • Be extremely cautious when a mortgage is included in the bankruptcy.

Mortgage Included in a Chapter 7 Bankruptcy

Florida USDA, VA, FHA, and Conventional Loans after BankruptcyIf there was a mortgage discharged through bankruptcy, it’s vital to find out when the deed to the property actually transferred out of their name.

While FHA guidelines only have a two year waiting period after a Chapter 7 Bankruptcy, once the deed transfer actually occurs, foreclosure waiting periods will also apply based on that date – not that date of the bankruptcy discharge!

Thankfully, USDA, VA, and Fannie Mae guidelines are more lenient when a mortgage was included with a Chapter 7 Bankruptcy. They do not restart the foreclosure waiting period based on the deed transfer date.

USDA Waiting Period Exceptions

My office has been able to successfully process USDA loan exceptions after a Chapter 7 Bankruptcy. These exceptions are on a case by case scenario and based on individual circumstances.

Recent Denial?

If you are trying to qualify for a mortgage and have recently been denied due to a previous Chapter 7 Bankruptcy, please take advantage of our FREE Second Opinion Service (SOS).

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