Profile picture for Frank Sams

Bankruptcy and Mortgage Approval 2+ years out

Hello.

I am hoping to be able to apply for a mortgage in the summer of 2014 and I wanted to ask the experts here their opinion.  I declared ch 7 bankruptcy and it was discharged on 5/30/12.  From what I understand, you must be at least two years removed from discharge date to be eligible for FHA, and I'm assuming any other type of mortgage.  I just pulled my VantageScore and it's 698.  I now make $75,000 and will have (hopefully) been at my job 8+ years by next summer.  I will have between $20,000-$30,000 for a down payment.  I am in KS if that matters.

I currently have a student loan, auto loan and one credit card with a $500 limit and the balance stays below $100.  I opened that to start my credit repair.  I've been on time with them all since the bankruptcy.

So having said all that, I feel like my income, job history and now debt level are on my side and I have another 8-10 months to continue bumping my score up, but the bankruptcy is obviously the huge cloud hanging over all of this.

Can anyone give some advice as to whether you think I would receive approval next summer?

Thank you.
  • October 18 2013 - US
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Answers (4)

You should be good, the key is maintain excellent credit history subsequent to the bankruptcy.  The savings you've accumulated and the job time just further strengthens your request.  As of today your only options are gov't loans (FHA, VA or USDA).  698 credit score is solid for these types of loans.  Sounds like you just need the 2 years seasoning on the bankruptcy and your ready to get prequalified.
  • October 18 2013
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Profile picture for Frank Sams
Thank you for the quick feedback.

Regarding the Back to Work program, the bankruptcy was due to my significant other losing her job.  I will be the only one on the application, and my job/income technically wasn't affected, but we definitely lost more than 20% of our household income.

Since she won't be on the loan application, any idea if I would qualify for the Back to Work program?  I googled it after your suggestion but couldn't find anything fitting my specific situation.

Thanks again.
  • October 18 2013
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It sounds like you are on the right path already.    Currently FHA is the only option for 2 years removed from Chapter 7, so you have the right program in mind.

If you can prove that your bankruptcy resulted from a 20% or greater loss of income, you might actually be eligible already only 1 year from bankruptcy under the new FHA "Back to Work" program that was announced 2 months ago.   I would advise you look into the details of that program to see if you might already be eligible and if not continue what you are doing and you should be in good shape at the 2 year mark.
  • October 18 2013
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Yes, you should be able qualify for an FHA loan. Depending on the lender, you still might have to explain/document the circumstances surrounding the Ch. 7 BK, regardless of it being outside of two years.
  • October 18 2013
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