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After a Chapter 7 Bankruptcy, Here’s How to Qualify for a Mortgage

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.

Waiting periods will apply once a Chapter 7 Bankruptcy has been discharged. This determines how quickly a homebuyer can qualify for a mortgage.

Waiting Periods

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.

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

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, when a mortgage is included with Chapter 7, USDA, VA, and Fannie Mae guidelines are more lenient for homebuyers. They don’t 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 Chapter 7. These exceptions are on a case by case scenario and based on individual circumstances.

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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