Buying After Bankruptcy

When the economy fell just over a decade ago, many of American’s lost their careers and their homes. And since then they have been struggling to bring themselves back to where they came from.

If you fall among the percentage of American’s who declared bankruptcy during this period in time, you are not alone. But you should definitely not think that it means you can no longer buy a house.


Do not let bankruptcy be the end of your home-buying journey.

Generally speaking, foreclosure leads to bankruptcy. Foreclosure means deficiency (or lacking). So, let’s say you owe $150,000 on your home still and in the foreclosure or sheriff sale, it is sold for $50,000. That means, realistically, you still owe $100,000 on the home.

Now, generally speaking, this final amount is unrealistic for an individual or a family to pay. So declaring bankruptcy to clear their name of the foreclosure and the deficiency.


While this may seem like the end of the line, it most definitely is not. First and foremost, there is a waiting period between declaring bankruptcy and applying for another mortgage to purchase a new home.

Here are the waiting periods for the four major loans available:

FHA Loans 2 years

*note: this 2 year waiting period is for Chapter 7 FHA Mortgage. You can actually be paying on a Chapter 13 Mortgage and still be approved.

VA Home Loans 2 years

Conventional Mortgages 4 years

USDA Home Loans 3 years

Once you have surpassed this time frame, you can then begin to entertain the idea of applying for a new mortgage. There are always exceptions to every “rule,” and this is the standard across the board. But at times, there are some circumstances where you can qualify for additional loans before this time period is up.

Now, these guidelines are when your foreclosure is tied up in your declaration of bankruptcy. The foreclosure waiting period for a conventional loan is seven years. But, depending on the period of time between the foreclosure and your declaration of bankruptcy (either before or after), you may qualify for a reduction in the waiting period.


Foreclosure then bankruptcy

When your house is foreclosed upon before you declare bankruptcy, things are much more simple. The waiting period begins at the date of the bankruptcy discharge date. For example, if your home was foreclosed in January 2005, filed for bankruptcy in October 2005, and the bankruptcy was discharged in December 2005- the waiting period begins in December 2005. Based on the standards for the conventional mortgage waiting period, you would be eligible for another mortgage in December 2009.

Bankruptcy then foreclosure

Sometimes the roles are reversed. Whether intentional or not, there are times where the bankruptcy discharge date is prior to the actual foreclosure date. When that happens, as long as your foreclosure is tied to your bankruptcy, your waiting period will still fall within the conventional waiting periods listed above.

This is slightly more complicated, but definitely still understandable in layman’s terms. It varies from loan to loan what the waiting period or leniency will be.

For more information on the exact waiting periods for your unique situation, please consult a mortgage consultant. Since each situation is different, it is important to understand exactly where you stand.



Total Home Lending



Natasha Mason

Buying After Bankruptcy2020-09-28T15:14:20+00:00

FHA Lowers Insurance Premium: what that means for your loan

We shared the news a bit earlier this week—The Federal Housing Administration (FHA) is set to cut their insurance premium.

The FHA is an organization that does not actually provide loans, but provides insurance that protects lenders. This is to ensure lenders (ie- a mortgage company) has some measure of protection if a borrower runs into any complications. That could be anything from missing loan payments to defaulting on their loan.

There are a fair amount of requirements that Congress has established for the FHA. One of those is that the FHA has enough reserves to cover losses over a projected 30 years.

Now, over the past four years, the FHA has seen consistent and consecutive growth. Because of this, they have made the decision to share that growth with American families—in the form of savings.

The primary objective is to allow for greater credit access across the country. Lower insurance premiums allows for individuals (and families) significant savings.

All of this information was released this past Monday. And, on Monday, it was stated that borrowers who close on an FHA loan after January 27th of this year will pay 25 basis points less.


So what does this mean for you?

If you have been house hunting or even seeking out your various loan options, the home of your dreams may be closer than you think. With lower FHA insurance premiums, borrowers (like yourself) will be spending less each month, meaning you can afford a monthly payment you may not have been able to before.

To see what, exactly, this may look like for you, we recommend you talk to one of our loan officers directly. They can discuss your unique loan options, as well as the savings you may have in store with this lower FHA insurance premium.



By Natasha Mason

FHA Lowers Insurance Premium: what that means for your loan2020-09-28T15:14:21+00:00
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