Many of my clients are curious/anxious about acquiring a mortgage after they file a bankruptcy case. Can I get one? Will I get one? WHEN can I get one?
The answer to that I guess is….all in good time my friends.
First off..…”Can” or “Will” I get a new mortgage after I file bankruptcy? The answer to that is “sure” that’s an affirmative. There is nothing in the bankruptcy code stating that mortgage lenders can’t give you a loan if they want to. Of course, each lender has it‘s own protocols in terms of how they assess creditworthiness and whether or not they make any particular person a loan is going to depend on quite a number of factors. A non-exclusive list of those factors would be some major items like nature and length (so stability) of your employment, your current debt load and your ability to service that debt along with any new debt you contemplating taking on, the fair market value of the property and the amount of the loan you are looking for, etc., etc.
Look….it’s not the wild west out there anymore like we had before the housing/mortgage meltdown when pretty much anyone could get a loan on just “stated” income without having to provide a shred of documentation. Lenders are more cautious now……and with good reason. However…they have money to lend and interest rates are simply “great”—historical lows and all.
However, there are certain underwriting requirements for some very popular loan programs when someone has filed a bankruptcy, had a foreclosure or did a short sale. Here’s the skinny on the WHEN question for those who have filed bankruptcy and are looking to refinance or take out a new mortgage loan;
FHA…………2 years with reestablished credit.
VA……2 years with reestablished credit.
Conventional financing….4 years for a chapter 7 filer unless documented extenuating circumstances and reestablished credit. If a chapter 13 case…2 years from the date of discharge or 4 years from any dismissal.
For those with a prior foreclosure or short sale….
FHA……generally speaking 3 years with an exception for short sales if the borrower was current on all debt at the time of the sale..then there is no waiting period.
VA……2 years with reestablished credit.
Conventional financing…….on a short sale it would be 2 to 7 years with a reduced loan to value (LTV) and with reestablished credit. In the event of a foreclosure then it would be 7 years. However, it could be 3 years if documented extenuating circumstances with reduced loan to value (LTV–as above) and with reestablished credit.
So…as you can see….a prior bankruptcy is not the “kiss of death” in terms of getting a new mortgage. When I first started practicing bankruptcy back in 1990 it pretty much was. My how things have changed. It went from the “wild west” days I mentioned previously when your pet could almost get a loan to the really rough period we went through recently when even folks with stellar credit had trouble finding a loan. Everything….given time…finds it’s own level. Things are on a more even keel now and it’s getting better. Housing values have started to rise, banks are more willing to give loans to qualified buyers and there is a pent up demand of people who want and need housing. As housing goes so goes our economy. I‘m not in the mortgage business. However, if you are looking for a good mortgage lender I can refer you to a couple. Don‘t be dismayed if you have or need to file bankruptcy or had short sale or foreclosure events. There’s hope. The idea is that if you are experiencing or have had experienced a financial calamity we can help you make as soft a landing as possible. The goal is to preserve your assets, reduce or eliminate the debt and move forward in a positive fashion.
If you need help please give us a call.
David D. Kingsbury
Offices in Apple Valley and Rochester, MN
*Be advised that the advice given regarding qualifying for mortgages after certain events is deemed reliable and not guaranteed as they are subject to change at any time.