Post-bankruptcy mortgages

New Jersey residents considering bankruptcy should know that such a step need not prevent them from owning a home again in the future.

Many people in New Jersey who struggled through the recession found some relief in filing for bankruptcy. Others may find themselves in such a situation now despite the improving economy. When making the decision to file for a Chapter 7 or a Chapter 13 bankruptcy, many questions about future credit worthiness logically come up.

One particular question people often have is whether or not they can ever get a mortgage after filing for bankruptcy. The good news is that it is indeed possible for consumers with bankruptcies on their credit reports to get mortgages. The New York Times notes that especially since the economic rebound, more and more people have done just that. The same is true of people who have experienced foreclosures or other actions.

Fannie Mae and the Federal Housing Authority have their own criteria related to post-bankruptcy and post-foreclosure mortgages. For both agencies, debtors generally have to wait a certain amount of time before making new mortgage applications.

Fannie Mae requirements

Consumers who want to apply for a Fannie Mae loans after having gone through a Chapter 13 or a Chapter 7 generally have to let at least four years go by after their bankruptcies have been dismissed. There are some extenuating situations in which the wait period can be reduced to only two years. The general rule of thumb of four years or two with extenuating circumstances also applies to consumers with deeds-in-lieu or pre-foreclosures on their credit histories.

For most people who lost their homes in foreclosures, a total of seven years should be waited before seeking a new mortgage. However, if special requirements are met, this time may be cut down to only three years. It is important to note that if a loan is allowed after three years, there may be caps on how much can be borrowed.

FHA requirements

The FHA post-bankruptcy period is called a seasoning period. For consumers who filed Chapter 13 plans, the option to apply for new mortgages even while their bankruptcies are still active may exist. In order to do this, they will need to have been on time and current with all plan payments and have otherwise good credit. They should also be employed with an income sufficient to justify the new loan. Written statements from loan seekers providing details about their pre- and post-bankruptcy situations can also be required.

People wishing to obtain an FHA-backed loan after filing a Chapter 7 bankruptcy will need to wait either two or three years from the date that their cases were discharged. The length of time is subject to individual bank requirements.

Get the facts

Consumers should always work with an attorney when seeking debt consolidation or relief such as bankruptcies. The effects of decisions involving these options can be long-lasting and getting the right guidance up front can go a long way toward setting up a better financial future.