After Filing for Chapter 13 Bankruptcy, You Can Buy a Home Sooner Than You Think
Monday Oct 23rd, 2017Share
It's natural to wonder whether you'll be able to buy a home after you’ve filed bankruptcy. After all, everyone has to live somewhere—even those who have turned to the court system for help with handling their debts.
Applying for bankruptcy will affect your credit history for years to come and can make getting approved for housing a challenge. But will a bankruptcy quash your chances of ever owning a home? The answer to that question is unequivocally - NO.
Many people are aware that they may buy a home 2 years after obtaining a Chapter 7 bankruptcy discharge. Those that are aware of this rule including many loan officers think the same guideline applies to Chapter 13 bankruptcy as well. In reality, the rule for Chapter 13 is very different and you may be eligible to buy a home in as little as 1 year (12 months) after filing for Chapter 13 bankruptcy. Your Chapter 13 bankruptcy repayment plan does not have to be completed, nor does your Chapter 13 bankruptcy need to be discharged.
To see how you can buy a home while in Chapter 13 bankruptcy, let's start with an overview of how Chapter 13 bankruptcy works.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy—sometimes called a wage earner's plan—is typically sought by people who want to pay off their debts but can't afford to pay them all off at the same time. Instead, they turn to the courts to essentially buy time to pay off their bills over time. It's available to anyone whose unsecured debts are less than $394,725 and secured debts are less than $1,184,200. Today, one-third of all bankruptcies in the United States are Chapter 13.
How To Buy a Home While In a Chapter 13 Bankruptcy
It is possible to get a home 12 months after filing if you meet certain criteria.
One year of the payout period under the bankruptcy has elapsed.
The borrower’s payment history has been satisfactory, and all required payments have been made on time.
The borrower has received written permission from bankruptcy court to enter into the mortgage transaction.
Keep in mind that not all lenders or banks that originate FHA-insured mortgages offer loans to buyers under these guidelines, as lenders have their own overlays and may have different guidelines. You will need to shop around to find a lender that provides loans to consumers under these guidelines. A mortgage broker is most likely your best bet in locating a lender, as mortgage brokers work with and are familiar with the guidelines of several lenders.
Spend a year rebuilding your credit and paying your Chapter 13 on time, then buy a home to continue building you and your family's wealth. What better way to recover from a financial setback.
Tonya Brown specializes in working with buyers who are currently or previously have filed for Chapter 13 bankruptcy. Click the link below to get pre-approved and see if she can assist you with getting into the home of your dreams.