How to Get a Mortgage Right After a Bankruptcy
Many assume that after filing for a bankruptcy that you can not get a mortgage for at least 2-3 years until after it is discharged. While this is the case with most banks and mortgage companies, there are some non-prime lenders that do not have these sort of waiting periods. This means that you may be able to get a mortgage even just one day after a bankruptcy!
What Do Non-Prime Loans Offer?
Non-prime loans provide much more flexible qualification requirements than prime loans.
Several mortgage lenders offer non-prime loans, which have the following advantages:
- No waiting periods after any type of bankruptcy (including chapter 7 and chapter 13 bankruptcies).
- There are also no waiting periods required after a foreclosure or short sale.
- Qualify with a credit score as low as 500.
- LTVs as high as 90%.
- Loan amounts available up to $5,000,000.
- DTI ratios as high as 50% accepted.
- Foreign nationals and ITIN borrowers may be eligible.
- Asset depletion allowed (use your assets instead of income to qualify).
- Options to use your bank statements instead of tax returns (bank statement loans for self-employed borrowers).
The exact requirements to get a non-prime loan vary from lender to lender. You can view 7 of the best non-prime lenders below. All of these lenders do not have any waiting periods after a bankruptcy. If you would like some assistance finding a lender, we can help match you with a lender.
Non-Prime Lenders with no Waiting Periods After a Bankruptcy
Below are a few of the best mortgage lenders that deal with bankruptcies differently. All of these lenders offer opportunities to get a mortgage immediately after a bankruptcy.
1 – Peoples Bank
Peoples Bank has multiple loan options after bankruptcy. They try to provide prime loan options for all that qualify including FHA, VA, and USDA options with no waiting period after Chapter 13 discharge, 12 monthly payments during Chapter 13, and 24 months waiting period for Chapter 7. All these options have low down payment options and cash-out refinances.
Non-prime options are available as well and include no seasoning requirements for foreclosures and 12 month’s seasoning on bankruptcies. Credit score requirements are as low as 620, and loan amounts are available up to $3,000,000.
Citadel does not require any waiting period after a bankruptcy. They also are very lenient on what credit scores they will approve (often applicants with a credit score in the 500’s will still qualify). The maximum LTV ratio (loan-to-value ratio) that they allow is 90%. Citadel offers loan amounts up to $5,000,000.
First National Bank allows the highest max DTI ratio (55%) of any mortgage lender that offers mortgage loans without a waiting period after a bankruptcy. The highest LTV allows is 80%, and they have flexible income and credit qualification guidelines.
4 – ACC Mortgage
ACC Mortgage offers what they call a “Second Chance Purchase Program”, which allows borrowers to get a new mortgage immediately after a bankruptcy is discharged. Another great aspect of this mortgage program is that there is no minimum credit score requirement.
The non-prime program offered by Angel Oak does not have any seasoning requirements for bankruptcies, foreclosures, or short sales. This means that you can be only 1 day out of bankruptcy, and still may qualify. As for credit score requirements, they often allow credit scores all the way down to a 500! The maximum LTV allowed is 85%, so be prepared to put 15% down if you qualify for a loan through Angel Oak.
6 – Green Box Loans
Green Box Loans actually requires you to be 1 year out of a bankruptcy before being eligible for a new mortgage. This is still better than most lenders guidelines, so we felt it would be worth including them in this list.
Waiting Periods for Prime Mortgage Loans
Below is some information on the waiting periods to get a prime loan after a bankruptcy. This includes details on the waiting periods for conventional loans, FHA loans, VA loans, and USDA loans.
Conventional Loan After Bankruptcy
Until recently, Fannie Mae required that a borrower wait at least 4 years after their bankruptcy discharged before they would be eligible to apply for a conventional loan. Some great news, is in 2020, this waiting period has been reduced to only 2 years. You will likely need to rebuild your credit, but fortunately you may be able to get a conventional loan only just 24 months after your bankruptcy is discharged.
FHA Loan After Bankruptcy
The FHA rules state that you must wait at least 2 years after filing a chapter 7 bankruptcy. Some banks may require a longer time to pass, but many FHA lenders will approve an application only after 2 years. For a chapter 13, you only need to wait until you have successfully made 12 months of payments. Additionally, you will need to provide the court trustee’s written approval. Also, keep in mind that the clock doesn’t start upon filing, but rather once the bankruptcy has been discharged.
USDA Loan After Bankruptcy
The USDA rules are similar to the FHA. You will need to wait at least 2 years after filing a chapter 7 bankruptcy. For a chapter 13 bankruptcy, you may be eligible after making 1 years worth of payments on time.
As you can see, there are different rules related to waiting periods for various types of mortgage programs. If you have had a recent bankruptcy, you may have options to get a mortgage. If you would like some help finding a mortgage lender, we can help match you with a lender in your location.
Getting a Mortgage After a Bankruptcy and Foreclosure
If you went through a foreclosure and bankruptcy around the same time, which is quite common, there are more steps that may be needed prior to being eligible for a conventional, FHA, or USDA loan. What often occurs is a foreclosure and bankruptcy in a short period of time. Many times, if someone loses a job, they will foreclose and then file for bankruptcy not long after. Many lenders charge what is known as a “deficiency” to recover losses from the foreclosed property. This leads many to file for a chapter 7 bankruptcy in order to clear the deficiency.
Whatever your reason was for foreclosing and filing for bankruptcy, you may have a chance to purchase a home again using a conventional, FHA, or USDA loan. The clock for your waiting period will begin once either the home has fully foreclosed, or your bankruptcy has been discharged, whichever occurs last.
We understand there is a lot to grasp when embarking on becoming a homeowner again after a bankruptcy. Would you like some assistance in getting your questions answered, and finding the best mortgage lender for your particular situation? We provide a free lender matching service, and would be glad to provide you a free consultation to learn about your options.