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First Time Home Buyer

Buying Your First House After a Chapter 7 Discharge

In 2018 alone, more than 461,897 people filed for Chapter 7 bankruptcy. And that number is likely to increase over the next few years. If you’ve filed for Chapter 7 and had your debts discharged, you were given a clean slate and able to get your finances back in order. That means you might be considering buying a house again to give your family a sense of stability. But there’s more to buying your first house after bankruptcy than you might think. Here’s what you need to know about the process.

There’s a Waiting Period

Taking out a mortgage when buying your first house means taking on potentially hundreds of thousands of dollars of debt. After filing for bankruptcy, lenders won’t be willing to work with you until you prove that you have your finances in order. That’s why they establish a waiting period before you can apply for financing. The exact waiting period depends on the type of loan you apply for.

Conventional Mortgages

If you’re interested in buying your first house after Chapter 7 bankruptcy with a conventional mortgage, you’ll have to wait for four years. Lenders will check your credit history and will know exactly when you filed for bankruptcy. If you submit an application before the waiting period is up, it will be denied.

Government-Backed Mortgages

Government-backed mortgages like VA loans, USDA loans, and FHA loans are a bit more flexible than conventional mortgages. Since the government guarantees the loan, lenders are willing to take on riskier borrowers. If you’re applying for a USDA loan, you have to wait three years after your debts are dismissed. If you’re applying for an FHA or VA loan, you can apply two years after the dismissal of your debts.

How to Make Your Application Stand Out

Regardless of which type of loan you’re applying for when buying your first home post-bankruptcy, keep track of your credit score. Do what you can to build it back up before you apply for the loan. The higher your score is, the more tempted lenders will be to give you a loan.

Bankruptcy Isn’t the End of the World

If you’ve filed for Chapter 7 bankruptcy, don’t stress about buying your first home after your debts get dismissed. Apply with Mortgage Solutions Financial and find the right financing for your new home. We’ll help you get a great loan whether you’re looking for a conventional mortgage or want to finance with a government-backed loan.