Borrowers who have filed bankruptcy can qualify for a mortgage. The question is when. Waiting periods vary by bankruptcy chapter and loan program, and can be reduced in some cases when the bankruptcy was caused by a documented qualifying hardship. Knowing the exact timelines prevents you from taking application prematurely.
Chapter 7 Waiting Periods
- ✦Fannie Mae conventional: 4 years from discharge date; 2 years with approved extenuating circumstances
- ✦Freddie Mac conventional: 4 years from discharge date; 2 years with extenuating circumstances
- ✦FHA: 2 years from discharge date; 1 year with extenuating circumstances if credit has been re-established
- ✦VA: 2 years from discharge date; earlier eligibility possible with re-established credit and underwriter approval
- ✦USDA: 3 years from discharge date
Chapter 13 Waiting Periods
- ✦Fannie Mae: 2 years from discharge date, or 4 years from dismissal date
- ✦Freddie Mac: 2 years from discharge date, or 4 years from dismissal
- ✦FHA: 12 months of on-time plan payments with court and trustee approval; no waiting period after discharge if 12-month payment history is clean
- ✦VA: 12 months of on-time plan payments; court trustee approval required
- ✦USDA: 3 years from discharge
Extenuating Circumstances
Extenuating circumstances are non-recurring events beyond the borrower's control that caused a severe financial hardship. Qualifying events include loss of a primary wage earner, serious illness, or natural disaster. The borrower must provide documentation of the event, proof of prior satisfactory credit, and demonstrate that credit has been re-established since. Job loss alone does not qualify unless it was accompanied by a simultaneous medical event or similar documented hardship.
Rebuilding Credit After Bankruptcy
Start rebuilding credit immediately after discharge. Secured credit cards, credit-builder loans, and being added as an authorized user on established accounts all help. Minimum FICO requirements after bankruptcy are standard: 580 for FHA, 620 for conventional, 640 for most USDA lenders. Get the borrower's credit report at the 18-month mark to assess readiness before the waiting period ends.
Aria knows the exact waiting periods and extenuating circumstance rules for every agency program and can tell you when your borrower will be eligible to apply. Ask at vicariointel.com.
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