Filing for bankruptcy can often be an effective way to reorganize or eliminate debts. However, it can also make it harder to buy a home in Michigan. You will need to wait at least a year to obtain an FHA mortgage from a bank or credit union while it can take up to four years after bankruptcy to get a conventional mortgage.
Getting a mortgage after Chapter 7
You will need to wait two years after a Chapter 7 personal bankruptcy discharge to obtain an FHA loan. The waiting period is dropped to a single year if you can prove that the bankruptcy was a result of extenuating circumstances. Extenuating circumstances include the death of a spouse, an unexpected medical expense or losses incurred after a natural disaster. The waiting period is two years for a VA loan after a Chapter 7, three years for a USDA loan and four years for a conventional mortgage. You will also need to meet minimum credit score, down payment and other lender requirements.
Getting a mortgage after filing for Chapter 13
If you’re in the market for an FHA, USDA or VA loan, you only need to wait a year after filing for Chapter 13 bankruptcy to get a mortgage. The waiting period is two years to get a conventional mortgage. You may also need to get permission from the bankruptcy court to incur new debt while your case is ongoing.
A bankruptcy may wipe away credit card, medical and other types of debt. You may also see an increase to your credit score after filing or receiving a discharge. Although there is a waiting period before applying for a mortgage, these factors may make it easier to obtain loan approval when you’re eligible to do so.
