By Ryan C. Wood
Filing for bankruptcy is not nearly as bad financially as the media and banks want you to believe. The mass media has done all of us a disservice with the information they report and how they now gather that information. In 2005 there was a major change to the Bankruptcy Code. It is not impossible or more difficult than before. It is just more expensive given a lot of work was added to the process of filing bankruptcy and obtaining a discharge. We really cannot rely on the mass media anymore. Yes, you can buy a house while in a Chapter 13 reorganization case and after receiving a discharge under Chapter 7 or other chapter of the Bankruptcy Code.
First Start To Rebuild Your Credit
There will have to be some time to pass before you will qualify for a mortgage to purchase a home. To rebuild credit there is no magic formula that can overnight night make your credit score 800. It takes time and on-time payments of something to rebuild credit. Do not pay anyone to repair or remove items. These are scams. Please go to the Federal Trade Commission’s and search “how to dispute inaccurate credit report information” and follow the instructions step by step for free. You can do it yourself. Your bankruptcy lawyers should have information for you about secured credit cards and how to rebuild your credit.
Some Times Will Have To Pass Before Qualifying for a Mortgage
The waiting time periods vary depending upon your circumstances. A chapter 7 bankruptcy filer can usually obtain a conventional type mortgage or loan four years after receiving the chapter 7 discharge. If the bankruptcy filer is lucky enough to qualify for a FHA or VA loan the waiting period is only two years.
In a Chapter 13 reorganization case it is possible to qualify for a conventional mortgage loan while still within the three or five years the chapter 13 plan of reorganization will last. Begs the question where did the down payment come from though. Or just one year after receiving a Chapter 13 discharge after completing the plan. Like in a Chapter 7 case above the FHA an VA loans are more loose.
Chapter 7, conventional loan or mortgage is at least four years from the entry of the order of discharge
Chapter 7, FHA or VHA: two years from the entry of the order of discharge
Chapter 13, conventional mortgage: one year from filing of the petition for relief under Chapter 13
Chapter 13, FHA or VHA: really depends upon your ability to qualify and whether it will mess up the chapter 13 plan already in place
The Easiest Example of How To Purchase A House After Bankruptcy Or While In A Chapter 13 Case
The issue really is whether you as the bankruptcy filer qualifying for the loan to purchase a house. There is not much your bankruptcy attorneys can do other than file and obtain a discharge of your debts properly. There are some general guidelines that I will list below. But to start with where is the down payment coming from? There are all kind of programs to reduce the amount of the down payment to anywhere from 20% to 0%. You might also receive the down payment from a third party as a gift so there are no issues. The issue is how did you come up with the thousands of dollars for the down payment when you are committing all of your disposable income for the benefit of your creditors in the Chapter 13 plan? So again, it depends upon where the down payment is coming from.
What About the Monthly Mortgage Payment?
Now what about the monthly mortgage payment plus property tax and insurance? Well, at least in the Bay Area rent can be more than a mortgage loan monthly payment. So usually the amount being paid for rent is similar to the amount of the new monthly mortgage payment. Basically the purchase of the home does not change the numbers in the bankruptcy case.