Debtors in North Carolina who file for bankruptcy may be able to reduce or eliminate most debt balances. In many cases, filing for bankruptcy also results in a lower credit score and tarnished credit history. Ultimately, this may jeopardize your plan to get a home loan in the near future.
It can take up to four years to get a mortgage
Generally speaking, you will need to wait four years from the date that you filed Chapter 7 bankruptcy paperwork before you’re eligible for a traditional mortgage. You will need to wait two years before you are eligible for an FHA or VA loan, and it generally takes three years after filing for Chapter 7 bankruptcy to become eligible for a USDA loan. If a bankruptcy was caused by extenuating circumstances, you may be able to get an FHA loan just a year after seeking protection from creditors.
Wait times are shorter if you filed for Chapter 13 protection
In most cases, you can obtain FHA, VA or USDA loans within a year of filing Chapter 13 paperwork. If you are seeking a traditional mortgage, you can typically do so two years after a case is discharged or four years after it is dismissed. The wait time is generally shorter for those who pursue a Chapter 13 proceeding because they have made an effort to repay creditors.
What lenders look at when evaluating a mortgage application
In addition to complying with wait period rules, you will likely need to meet credit score and down payment requirements. To obtain a traditional mortgage, you will typically need a credit score of at least 620 and a down payment of at least 20%. It may be possible to get an FHA loan with a credit score of at least 500 and a down payment of up to 10%.
An attorney may be able to help you learn more about how to file for bankruptcy and the potential consequences of doing so. Legal counsel may also explain how to obtain a mortgage during or after a bankruptcy proceeding.
