What if You Have Had a Recent Bankruptcy

Contrary to popular beliefs, obtaining a mortgage after a BK has become relatively easy. Many lenders view bankruptcy as a second chance opportunity. Most mortgage insurers have a waiting period after a bankruptcy discharge.

Fannie Mae—4 years
Freddie Mac—4 years
FHA—2 years
Sub-prime—1 year

What if you are Deciding to File Bankruptcy?

If you decide to file bankruptcy, it is important that you try to pay your existing credit on time until your bankruptcy is discharged. It may seem pointless– especially if you are filing a chapter 7, but the effect it could have on your credit score could be invaluable.

Clearly, FHA has the best program after a bankruptcy. If you pay your rent on time, utilities, insurance, buy-here-pay-here, auto loan, secured credit cards, etc for 2 years (24 months) - you can qualify for an FHA loan with great rates and low down payments (3%). There are the charity organizations willing to gift you (Free) money for your down payment.

There are also some sub-prime (non-conventional) lenders who will give you a mortgage right after a bankruptcy has been discharged. Be prepared to pay a higher interest rate—usually 2% - 4% above the Fannie Mae, Freddie Mac, and FHA rates.

Should you take one of these loans? That’s up to you to decide what’s best for you and your family. In most cases your mortgage payment will compatible with what renting would cost you.