Can You Get a Mortgage After Chapter 7 Bankruptcy?

Apr 23, 2021 | Bankruptcy

The simple answer to this question is yes. However, different aspects affect your ability to get a mortgage after a Chapter 7 bankruptcy ruling. These include the type of loan you seek, the time that has passed since the Chapter 7 discharge, and whether or not you qualify for the desired type of loan.

How Much Time Do You Have to Wait?

Depending on the type of loan you seek, you typically have to wait for two to four years from the date of the discharge, as highlighted in the corresponding table.

Type of Loan

Waiting Period

Federal Housing Administration (FHA) loan

Two years

Department of Veterans Affairs (VA) loan

Two years

Department of Agriculture (USDA) loan

Three years

Conventional loan

Four years

While these are the usual waiting times for getting a mortgage after filing for Chapter 7 bankruptcy, you can get a conventional loan sooner by making a large down payment. For instance, you might qualify for a conventional mortgage within the first year if you can manage to make a down payment of 35%. However, even if you qualify, you would still end up paying a high interest rate.

Why Is Waiting a Good Idea?

While you might qualify to get a mortgage within a year after a Chapter 7 discharge, waiting for longer might work well for you. This is because your creditworthiness takes a beating after a bankruptcy discharge, and it’s not something you can fix quickly. If you do qualify for a loan in such a scenario, you will have to make a large down payment and pay higher interest.

Instead, use the time you have to rebuild your credit score by establishing a track record that demonstrates responsible use of credit. If you’re short on capital, you may also use this time to save money for the 20% down payment that most conventional loans require. Over a course of three to four years, with a better credit score in tow, you may expect a noticeably lower interest rate.

Even a single-point increase in mortgage rates can lead to you paying thousands of dollars more as interest over the course of a 30-year mortgage.

Types of Mortgages for Which You Might Qualify

While getting a conventional loan might seem like a good idea, you may benefit by getting government-backed loans under different circumstances.

Conventional Loans
You might qualify for a conventional mortgage through a bank or a credit union depending on your creditworthiness and the down payment amount. If your down payment is less than 20% of the home’s selling price, you will need to get private mortgage insurance (PMI).

FHA Loans
Provided and managed by the Federal Housing Administration, FHA loans give you the ability to pay as little as 3.5% down payment. However, you will then need to pay extra toward PMI.

VA Loans
The Department of Veteran Affairs provides VA loans to military veterans, serving members, and surviving spouses of veterans. If you are eligible, you may get a VA loan without making any down payment. In addition, you don’t have to pay extra for PMI.

USDA Loans
The U.S. Department of Agriculture provides USDA loans meant particularly for rural borrowers who meet minimum income requirements. These requirements vary based on where you live, the number of people in your household, as well as your age. Applicants need to meet other eligibility criteria as well. If you are eligible, you may qualify for a zero down payment loan. While you won’t need to get PMI, you will need to pay extra toward an upfront guarantee fee and an annual fee.


Getting a mortgage to buy a home after a Chapter 7 bankruptcy discharge is possible. All you need to do is exercise patience and make the most of the time you have to rebuild your credit. As long as you play your cards right, becoming a home owner is well within your grasp. If you have any questions about how or when you might qualify, consider contacting a bankruptcy attorney to get them answered.