Tired of being treated like a second class citizen because of a couple of mistakes? At Northwest Mortgage, Inc we believe good people get into bad situations and we have loan programs to help. We’re not here to judge you nor make you feel less than, we’re here with solutions to help solve your needs for a mortgage post bankruptcy.
What type of bankruptcy filed impacts mortgage approval rates
The type of bankruptcy will greatly impact the mortgage approval process. We’ll look at the most popular forms and discuss them individually to help inform on some of the challenges and possible solutions for each.
Chapter 7 Bankruptcy; Sell it All Off
Most often this is the bankruptcy for individuals who have little to no ability to repay their debts. Chapter 7 bankruptcy types requires an individual to sell as much of their personal assets as possible to pay back as much as possible to creditors. Often referred to as a ‘fresh start’, this type of bankruptcy does eliminate all dischargeable debt.
Chapter 13 Bankruptcy; Restructure Payment of Debt
Those individuals who have a routine source of income and are wanting to pay their debts but are currently unable to pay them as promised. This type of bankruptcy typically means you can keep a or some valuable assets, such as your home and or car. The court usually receives a payment plan from you or your representing attorney that consolidates debt into a monthly payment structure lasting three to five years. Payments are most often made through a trustee that’s been approved by the court. This type of bankruptcy provides immediate immunity from the actions of creditors in the form of lawsuits, wage garnishments and collection agency phone calls. Once the court ordered financial repayment plan has been satisfied, all eligible debts are discharged / cancelled. This remaining debt is ‘set aside’ ensuring individuals who do not satisfy the debt repayment plan will not be eligible for discharged debt.
Mortgage approval rates with past bankruptcy
Bankruptcy certainly impacts loan approval rates for mortgages as creditors must assume greater risk but the approval rates improve as time passes.
- Chapter 7 bankruptcy on your credit report for up to 10 years
- Chapter 13 bankruptcy on your credit report up to 7 years
When does the clock start on mortgage approvals after bankruptcy?
You can get a mortgage after Chapter 7 bankruptcy, it’s just a matter of how much down payment you put down and how long it has been since the bankruptcy was discharged or properly satisfied. Often when the down payment is high enough, even a day after filing bankruptcy, banks will assume the risk but often at higher interest rates.
For Chapter 13, the timeline and approval rates often have much to do with the individual repayment plan, how long it has been underway or how long it has been properly satisfied or discharged.
Monitor your credit report to ensure it’s updated post bankruptcy
Your credit will reflect the ongoing changes that take place before, during and after bankruptcy. Whether it’s ten years or seven years after your bankruptcy discharge, your credit score will be negatively affected if the bankruptcy isn’t removed from your credit report. When the appropriate time and action has been taken, verify the removal of the bankruptcy and take immediate actions with the credit agencies yet to remove the bankruptcy. There are three major credit agencies in the United States: Equifax, Experian, and TransUnion.
Mortgage Approval Time Table Post Bankruptcy
|Loan Type||Chapter 7||Chapter 13|
|Conventional||4 years||2 years from discharge date;|
|4 years from dismissal date|
|FHA||2 years||1 year|
|USDA||3 years||1 year|
|VA||2 years||1 year|