Buying a House After Bankruptcy

Are you currently in a Chapter 13 bankruptcy and wondering about your options for a home loan?

Whether you already own a home and have built equity, or you're renting and would like to buy before interest rates increase, there may be encouraging solutions available for you.

‍Under today’s FHA and VA programs, both homeowners and renters may be eligible to obtain the home loan financing they need. At WVBK, we specialize in guiding borrowers through these complex circumstances.

If you’re a homeowner seeking to refinance your existing mortgage for better terms, or consolidate a first and second mortgage, there may be paths forward. Many borrowers also explore paying off their Chapter 13 balance in full using a cash-out refinance, potentially allowing for an early discharge. If you have sufficient equity, you might use it to pay off mortgage debt and any applicable interest. For renters aiming to become homeowners and start building equity, there may also be programs designed to help you achieve your goals.

Under FHA & VA programs, options may be available to obtain home loan financing with a Chapter 13 bankruptcy.  To determine if you may be eligible for government -insured financing:

• You must have completed at least 12 months of the payout period to the trustee under the bankruptcy plan, and
• Your payment performance must have been satisfactory with all required payments made on time, without exception, and
• You must have received written permission from the bankruptcy court to enter into the mortgage transaction.  The court’s requirements may vary by state.  Please ask your attorney about the exact process and what information is needed to gain permission.

Along with meeting these criteria, you will also need to provide a written explanation detailing the reasons for your bankruptcy. Additional supporting documents may be necessary, such as complete bankruptcy paperwork (including all schedules), rental payment history for the past 12 to 24 months, and evidence of financial reserves^[1], among others.

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^[1] Financial Reserves – one month financial reserves is equal to one month of the new housing expense including principal, interest, taxes, insurance, and Homeowners Association fees (if applicable).