Can You Buy a House After Bankruptcy?
Filing for bankruptcy can feel like hitting a dead end, but it doesn’t mean you’ll never own a home. Plenty of people buy homes after bankruptcy, it just takes time, the right loan, and a plan to rebuild your credit.
Lenders want to see financial stability, but they don’t expect perfection. With a little patience and smart steps, you can improve your chances of getting approved. The key is knowing how long you’ll need to wait, what loan options are available, and what you can do to make yourself a stronger borrower.
If you’re ready to take the next step, start with Rate’s Digital Mortgage Application and see what’s possible.
Can You Buy a House After Bankruptcy?
Yes, you can buy a house after bankruptcy, but the road back to homeownership requires time, strategy, and financial discipline.
Lenders understand that bankruptcy happens, but they want to see evidence that you’ve moved past it and are financially stable enough to take on a mortgage.
That means looking at your credit score, debt-to-income ratio (DTI), income consistency, and savings to determine whether you qualify.
How Long After Filing Bankruptcy Can You Buy a House?
How soon you can qualify for a mortgage depends on whether you filed Chapter 7 or Chapter 13 bankruptcy. The two types work differently, and lenders have separate rules for each.
Chapter 7 Bankruptcy Waiting Periods
Chapter 7 bankruptcy wipes out most debts, offering a fresh start. But because it signals severe financial distress, lenders require a longer waiting period before approving a mortgage. It also remains on your credit report for 10 years, though its impact lessens over time.
For a conventional loan, you’ll need to wait four years from the discharge date before applying. Government-backed loans tend to be more forgiving. FHA and VA loans require a two-year wait, while USDA loans typically require three years.
The waiting period gives you time to rebuild your credit and financial stability. Lenders want to see consistent income, responsible credit use, and a lower debt-to-income ratio before approving your mortgage.
Chapter 13 Bankruptcy Waiting Periods
Chapter 13 bankruptcy is different. Instead of wiping out debts, it sets up a repayment plan that lasts three to five years. Because this approach shows a commitment to repaying creditors, lenders view it more favorably, and waiting periods are often shorter.
If your bankruptcy was discharged, meaning you completed the repayment plan, you can apply for a conventional loan after two years. If your case was dismissed before completion, the wait time increases to four years.
FHA, VA, and USDA loans offer a faster path to homeownership. Borrowers may qualify after 12 months of on-time payments within the repayment plan, as long as the court approves the mortgage application.
How Long Does Bankruptcy Stay on a Credit File?
Bankruptcy doesn’t disappear overnight, but it doesn’t permanently ruin your ability to qualify for credit, either. A Chapter 7 bankruptcy stays on your credit report for 10 years, while Chapter 13 remains for 7 years.
The good news is that the impact of bankruptcy lessens over time. Lenders focus more on recent financial behavior than past mistakes. If you’re making on-time payments, keeping debt low, and using credit responsibly, you can see significant improvements in your credit score within one to two years.
By the time you’re eligible to apply for a mortgage, lenders will care more about how you’ve managed credit since your bankruptcy than the fact that it’s on your record. Consistent financial habits can help you move forward and put homeownership within reach sooner than you might think.
How Long Does It Take to Rebuild Credit After Bankruptcy?
There’s no set timeline for rebuilding credit after bankruptcy, but many people start seeing improvements within 12 to 24 months. The key to recovery is:
- Making all payments on time
- Keeping credit card balances low
- Avoiding unnecessary new debt
- Monitoring your credit report for errors
With consistent effort, your credit score can reach mortgage-qualifying levels in a few years.*
What Types of Mortgages Can You Apply for After Bankruptcy?
Several loan options are available for borrowers who have gone through bankruptcy.
Conventional Loans
If you’re hoping for a conventional loan, you’ll need to put in some work. These loans aren’t backed by the government, which means lenders take on more risk, so they set the bar higher.
Most require a minimum credit score of 620, and a down payment option of at least 3%. But here’s the catch: a stronger financial profile (think higher credit score, lower debt, and a larger down payment) can get you a much better deal.
Debt-to-income (DTI) ratio also matters, lenders usually want to see yours below 43%. If you’ve bounced back financially, a conventional loan could be a great option, but if your credit still needs some work, other loans might be more forgiving.
FHA Loans
FHA loans are one of the best options for buyers recovering from bankruptcy. Backed by the Federal Housing Administration, these loans come with more flexible requirements than conventional loans.
If your credit score is 580 or higher, you can qualify with a 3.5% down payment option. Got a credit score between 500 and 579? You can still get approved, but you’ll need to put down at least 10%.
FHA loans also allow higher DTI ratios, sometimes up to 50%, which can help if you’re still managing other debts. This loan is often the go-to choice for buyers who need some breathing room while rebuilding their credit.
VA Loans
If you’re a veteran, active-duty service member, or surviving spouse, VA loans are worth looking into. These loans come with huge benefits, no down payment, no private mortgage insurance (PMI), and competitive interest rates.
The Department of Veterans Affairs doesn’t set a minimum credit score, but most lenders look for 580 to 620. The standard DTI cap is 41%, but lenders often approve borrowers with higher DTIs if they have strong financial compensating factors.
If you qualify, VA loans can make buying a home post-bankruptcy a lot easier and more affordable.
USDA Loans
Thinking about moving to a rural or suburban area? USDA loans might be the answer. Designed for low-to-moderate-income buyers, these loans offer 100% financing, which means no down payment required.
Most lenders want to see a credit score of at least 620 and a DTI ratio under 41%. The biggest hurdle? Your home has to be in a USDA-eligible location, so if you’re set on city life, this might not be the best fit. But if you’re open to a move, USDA loans offer a great opportunity to buy with little upfront cost.
Non-QM Loans
If traditional loans aren’t working for you, Non-Qualified Mortgages (Non-QM loans) might be a solution. These are designed for borrowers who don’t meet conventional lending criteria, including those who’ve gone through bankruptcy.
Credit score requirements vary by lender, but many accept scores as low as 660. You’ll likely need a larger down payment (10-20%), and DTI requirements are more flexible, making it easier to qualify.
Non-QM loans come with higher interest rates, but they can be a great short-term solution while you work on improving your financial profile.
How to Improve Your Mortgage Approval Chances After Bankruptcy
Lenders don’t expect perfection, but they do need to see signs that you’re back on solid financial ground. If you’re serious about buying a home, here’s how to increase your chances of getting approved:
Rebuilding Your Credit Score
Your credit score is one of the biggest factors in mortgage approval. If you’re still working on yours, start by making all payments on time, this has the biggest impact on your score.
A secured credit card or credit-builder loan can help establish positive payment history. Also, keep your credit utilization low, ideally under 30% of your available credit limit. Every point counts, and small improvements over time can open the door to better loan options.
Reducing Your Debt-to-Income Ratio
Lenders look closely at your debt-to-income ratio (DTI) to determine how much risk they’re taking on. A high DTI can make it harder to get approved, even if your credit score is strong.
Paying off outstanding debts and avoiding new credit obligations can help bring your DTI down. Increasing your income, whether through a side job or career growth, can also make a big difference.
A lower DTI tells lenders you can handle your mortgage payments without stretching your budget too thin.
Saving for a Larger Down Payment
A bigger down payment makes you a less risky borrower, and lenders take that into account. If possible, aim for 10-20% down, even if your loan program requires less.
Not only will this increase your approval chances, but it can also reduce your monthly payments and help you qualify for better interest rates. Plus, it shows lenders that you’ve taken the time to build financial stability.
Working with Lenders Who Specialize in Post-Bankruptcy Mortgages
Not all lenders approach post-bankruptcy borrowers the same way. Some specialize in helping people rebuild their financial future and offer more flexible mortgage options.
Shopping around and working with lenders who understand your situation can make the process a lot smoother. They’ll look beyond just your credit score and take your full financial picture into account.
Demonstrating Stable Employment and Income
Lenders want to know you can consistently afford your mortgage payments. Having a steady job and reliable income for at least two years makes a big difference.
If you’ve switched jobs recently, be ready to explain the transition, especially if it came with a higher salary or better career prospects. The more financial stability you can show, the stronger your application will be.
How to Apply for a Mortgage After Bankruptcy?
Bankruptcy isn’t the end of your homeownership goals, it’s just a detour. With time, smart financial moves, and the right mortgage, you can still get the keys to your own home.
Lenders want to see stability, so focus on rebuilding your credit, lowering your debt, and saving for a down payment. When you’re ready, Rate makes the process simple. Start your application with Rate’s Digital Mortgage and take the first step toward homeownership - on your terms.
*Rate, Inc. does not provide credit counseling or credit repair services.
Guaranteed Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture, or any other government agency.
