May 20, 2011 May 20, 2015
Q: Hello. I’m recently seperated from my husband and had to file for Chapter 7 bankruptcy. How long will it take before I am able to buy another home? I got my discharge papers last year in November. I make about ninety-plus thousand a year.
–TLW, Tampa, Florida
The FHA will insure mortgages to individuals who have filed Chapter 7 liquidation bankruptcy two years after the discharge if “the borrower has re-established good credit (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs.”
With a good credit score you have many options for obtaining a loan. FHA, RHS, VA (if you have Veteran status), State and Local programs along with Conventional conforming or non- conforming loans should all be potential options for you.
The FHA has their own guidelines for loans they will accept. Keep in mind that FHA is not a bank; it’s a government agency that insures loans from FHA approved lenders. While the FHA will have its rules,
a bank will also have its own rules as well. Most banks today are only willing to finance FHA loans with credit scores of 640 and above. The FHA however will allow loans with credit scores as low as 540 with 20% down. Also, the FHA will require that you put down a minimum of 3.5%.
Conventional loans are typically for borrowers with money to put down (10-20%) and good credit scores. Most lenders in today’s market require a middle credit score of 660 or better to qualify for a conventional loan. To get your best deal you will need a credit score of at least 720. Since conventional loans are approved through underwriting engines created by Freddie Mac and Fannie Mae, the higher your credit scores are the better terms (rate) you will get. Conventional loans currently require a minimum of 5% down.
Interview mortgage brokers and obtain recommendations on them to find the one that works best with you. Your new mortgage broker will then be able to show you an entire suite of loan options.