Buying a House After Bankruptcy

Are you in a Chapter 13 bankruptcy? Currently own a home and have equity? OR – are you renting and wish you could buy while rates are still low? If yes, there may be good news for you. Under current FHA and VA programs, options may be available for homeowners or renters to obtain the home loan financing they are looking for. I’ve been helping borrowers navigate this seemingly challenging situation for over a decade.

For homeowners looking to refinance a current mortgage to better terms, consolidate a 1st and 2nd mortgage, there also may be options. If you have enough equity, you may even be able to pay off all mortgage debt, interest arrears (if applicable) and pay off your entire Chapter 13 balance. For current renters looking to buy and start building equity – there might be a potential program for you too!

In all situations, here are the basic starting set of guidelines:

1. You’ll need 2 out of 3 credit scores to be above 580 (Note: Due to COVID-19, you will now need a 640 FICO to qualify. As this may change in the future, reach out to build a roadmap for your qualification).
2. There can’t be more than 1 – 30 day late payment on any account on your credit report in the last 24 months. Also, we will need to verify rent/mortgage payments have been on time for the same 24-month period.
3. You will need to provide the trustee payment history since the start of the plan. There must have been at least 12 months on time payments made and regardless of time in repayment, all payments must have been on time to the trustee.
4. There must be 1 month of “post-closing reserves” or in regular terms – one month worth of your new housing payment left, after your loan has closed.
5. The trustee or court will need to approve the transaction. Once we have your loan application pre-qualified, we can send you estimated terms of your new transaction that you can forward to your attorney or trustee to begin the approval process. Every situation is different – I’ve seen trustee approval in a week, I’ve seen a court take 3 months. You will want to consult your attorney for turn-around times in your district.

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Seanna Severtson
Loan Officer / NMLS # 1944418
Willamette Valley Bank

**Seanna is a licensed Loan Officer with Willamette Valley Bank in their home loan division in Coeur d’Alene Idaho. She has experience helping borrowers achieve their home loan needs while in Chapter 13 bankruptcy—wherever your dreams take you.