How To Get A Mortgage Even With A Bankruptcy

Bankruptcy became an unfortunate option for many people as a result of the financial crisis the U.S. suffered the past three years. For those that still want to take advantage of lower home prices despite their credit issues, there is still hope. If you are in a chapter 13 or chapter 7 bankruptcy, how hard will it be to get a FHA purchase loan?

First Step To Rebuilding Credit During Bankruptcy
A bankruptcy less than one year old is a disqualifier for FHA so that is not an option for you at this time. Once your bankruptcy is discharged by the judge, you may begin the process of establishing a clean credit history one again.

Step one:
Apply for a secured credit card. Most banks offer this product and you can order a secured credit card online too. It requires that you place a minimum amount on deposit (these funds are what secure your card). There is usually an annual fee to pay for this product too. Once you have the secured credit card, use it at least one time per month. It does not matter what you purchase or how much it costs. A single tank of gas is good enough. When the bill arrives, pay it off in full and on time. Repeat this each month.

Step two:
After six months, ask the bank to consider switching you into an unsecured credit card. If the bank says no, continue using your secured card as described above. Every month, ask the bank again to switch you into an unsecured card. Eventually they will say yes.

Step three:
When you have worked your way back into an unsecured card, follow the same monthly process of making a purchase and paying it off in full and on time. Repeat this each month.

This will put you on the path toward rebuilding a clean credit history.

FHA Mortgage Rules Chapter 13 Bankruptcy
FHA will consider approving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. Written approval from the court trustee will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.

FHA Mortgage Rules Chapter 7 Bankruptcy
At least two years must have elapsed since the discharge date of the borrower or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation about what caused the bankruptcy will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, they must have have established good credit once again, and have a stable job.

Hard Money and Private Mortgages
If you ever end up in a position where you have 50% or more of a purchase price to apply toward a home, then getting a private mortgage is an option as well.