Will I Qualify For a Mortgage Loan After Filing for Bankruptcy?

Qualifying for a mortgage loan might sound far-fetched with a recent bankruptcy listed on your record, but it is possible. Bankruptcy, despite the negative connotation it carries, serves as a reliable resource when a person has fallen deep into debt and cannot get out.

Although bankruptcy will impact your chances of getting approved for certain types of loans and even credit cards, it doesn’t exactly stop you from obtaining an offer from a mortgage loan lender. Read on to learn more about how long you might have to wait before you can apply for a mortgage loan after your bankruptcy is discharged.

The bankruptcy type will determine how long you have to wait before you can apply for a mortgage.

If you file for Chapter 7 bankruptcy, you’ll likely need to wait two years after the court discharges you from bankruptcy before you can apply for a Federal Housing Authority (FHA) loan, according to Lending Tree (1). These types of loans are most favored by first-time home buyers with little money to spend and/or lower credit scores.

During that two-year waiting period, you’ll want to work on rebuilding your credit, and you’ll find some tips on how to do this further down below. Now, if you can show that you filed for Chapter 7 bankruptcy because you faced “circumstances beyond your control,” then you may be able to apply for an FHA loan just 12 months after your bankruptcy is discharged.

Filed for Chapter 13 bankruptcy and want to apply for an FHA loan? Here’s how long you’ll need to wait.

If you opted to file for Chapter 13 bankruptcy, which is often viewed as the wage-earners bankruptcy, then you’ll need to show that you’ve made payments to your repayment plan for at least a year, according to Lending Tree.

Unlike Chapter 7 bankruptcy, Chapter 13 allows you to work with a trustee to create a payment plan to satisfy some or all of the debt you’ve accrued. The payment plan is determined using your income and debt and usually lasts for three to five years.

In the event you want to apply for a different type of mortgage loan, you’ll want to check with the lender to find out what their timeline requirements look like following having a bankruptcy discharged.

How to rebuild your credit after filing for bankruptcy in Alabama?

1. Apply for a credit card and start building a positive payment history. If you don’t qualify for a credit card, research secured credit cards or credit builder loans. These are generally easy to obtain, even with bad credit, and can help you begin working on rebuilding your credit score.
2. Keep all accounts current. It’s important to keep any active accounts current and always make payments on or before the due date.
3. Keep your credit card balances at or below 30%.
4. Become a co-signer or authorized user on a relative or partner’s account.
5. Refrain from applying for too many new cards. This will hinder your progress as each new inquiry will ding your credit score.

Consider filing for bankruptcy in Alabama? Speak with a skilled Alabama bankruptcy lawyer today.

Now, if you haven’t yet filed for bankruptcy but believe it can help you get your finances back on track, a Moody, AL bankruptcy attorney can review your options with you. Hill, Gossett, Kemp & Hufford, P.C. is a bankruptcy law firm with locations in Moody, Leeds, and Springville and would be happy to help get you started with the bankruptcy process.

Have questions about this article or a legal concern? Call 800-672-3103.

Disclaimer: No representation is made that quality of legal services provided is greater than the quality of legal services provided by other attorneys.

Hill, Gossett, Kemp & Hufford, P.C. can be reached at:

Moody Office

2603 Moody Parkway, Suite 200

Moody, Alabama 35004

Phone: (205) 640-2000

Website: www.hwhlawgroup.com

Leeds Office

7900 Parkway Drive

Leeds, AL 35094

Phone: (205) 699-5500

Springville Office

6441 U.S. Highway 11