Getting a house after Chapter 13 bankruptcy

| May 18, 2021 | Chapter 13 |

If you are like many people in the United States, you’re eager to find a home to call your own. You may be interested in buying a ranch or getting a condo on the coast. Whatever it is that you like, if you find yourself in financial trouble, you may have to put those wants on hold.

When your debt is overwhelming and you decide to file for Chapter 13 bankruptcy, you should expect your credit score to drop. As a result, you may not have enough credit to qualify for certain home loans. Even if you do qualify for a loan, you might find that the rates aren’t good or that you can’t get a loan that is high enough for the property that you want.

The good news is that most people who go through Chapter 13 bankruptcy have an opportunity to get a loan for a new home in as little as a year.

What kinds of loans can you get after bankruptcy?

You can get almost any kind of loan after bankruptcy if you wait long enough, but some are available sooner than others. For example, the government-backed FHA, USDA and VA loans may be available to you as soon as year into the Chapter 13 bankruptcy. That means that your dream of homeownership could come true before you even emerge from bankruptcy.

Do keep in mind that buying a home during bankruptcy does add debt to your accounts, and you could find that it’s hard to afford those payments. However, it might be a good arrangement if the new mortgage will be less than your current rent payments, for example.

If you get a loan while you’re in bankruptcy, remember that you do still need to make all of your payments on time. If you don’t, you could face a foreclosure. You also may not be able to qualify for another bankruptcy so soon, so that would hurt your chances of stopping a foreclosure if you can’t afford to pay. You could still refinance during Chapter 13 bankruptcy, though, so long as your credit is in good shape.

Your attorney may have more information for you if you are interested in homeownership during your bankruptcy. This could be a great idea, or it may be one to set aside until your bankruptcy is finalized.

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