Even though you need the debt relief offered by bankruptcy, you may still have dreams of buying a home in Indiana.
The type of bankruptcy you file may impact your ability to secure a home mortgage.
Credit score
Rocket Mortgage states that bankruptcy affects your credit score which can affect your ability to obtain a mortgage. A Chapter 7 may have a bigger impact on your credit score than the debt restructuring plan of Chapter 13. The reason is that under Chapter 7 all qualifying debts go away.
FHA loans have lower credit requirements than a conventional loan with some accepting scores as low as 500. These loans make it easier for those with a bankruptcy impacting their credit scores. A Chapter 13 bankruptcy hangs around for 7 years on the credit report, while a Chapter 7 lasts for 10.
Wait time
Depending on the type of mortgage you seek, you can apply for a mortgage as soon as one year following a bankruptcy discharge. The most forgiving loans are those backed by the government such as VA and FHA loans. These loans simply require the completion of the bankruptcy discharge before applying for Chapter 13 filers and two years for Chapter 7 filers.
Conventional loans require additional wait times. However, even Chapter 7 bankruptcy filers may only need to wait four years before applying for a loan. Chapter 13 filers can apply for a conventional loan two years after dismissal and four years after filing.
Before you can consider applying for a mortgage, you must complete the bankruptcy process.
