Credit guidelines for mortgage loans are quite fluid these days and continue to change with time.  This information is based on current rules!  The Portland, Oregon housing market has not been hit as hard as some areas of the country but our unemployment remains high.  I see lots of commercial space sitting empty.  Of course, that suggests that “bankruptcy happens” (among other things).

CHAPTER 7 BANKRUPTCY:

FHA FINANCING

HUD requires that a minimum of two years from the date of discharge has passed AND good credit has been re-established.  To get the best interest rate, lenders require a minimum qualifying FICO score of 660 or higher.

CONVENTIONAL FINANCING

The wait period is four years from the discharge date.  To get the best interest rate, you need a minimum qualifying FICO score of 720.

Both loan programs allow an exception to the wait period for cases with extenuating circumstances.  For example,  if the bankruptcy was the result of a job loss, medical bills due to no insurance, disability, etc.  If you qualify for the exception, the wait is one year for FHA and two years for Conventional.

Different rules apply for Chapter 13 AND for consumers who have more than one bankruptcy within seven years.

CHAPTER 13 BANKRUPTCY:

FHA FINANCING

The filing of the Chapter 13 bankruptcy must be approved by the court and the debtor must have been in repayment for at least 12 months.  The repayment history as established by the Chapter 13 must be satisfactory and a credit history must be re-established.  The new mortgage must be approved by the bankruptcy court.

CONVENTIONAL FINANCING

The filing of the Chapter 13 bankruptcy must be approved by the court and the debtor much have been in repayment for at least 24 months.  The payment history must be satisfactory and a credit history re-established.  The new mortgage must be approved by the bankruptcy court.

If the Chapter 13 filing is not approved by the courts (meaning it was dismissed), then the buyer would need to wait four years to obtain a convention loan or two years to obtain an FHA loan!

About the Author | Janeese Jackson

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