Buying a house is major life event and goal that many people want to accomplish. New Jersey residents who have fallen on hard times may consider bankruptcy as a solution to unmanageable debt but may worry about being able to buy a house after bankruptcy.
The short answer to this question is yes, you can still buy a house after bankruptcy. Buying a home outright with cash after bankruptcy is a possibility, but the reality is many people do not have that luxury.
Most people will need to obtain a mortgage to buy a house. However, mortgage terms and offers are likely to be less favorable, so you will need to carefully evaluate your finances and determine if the mortgage payments are manageable. Be prepared to provide more documentation, since mortgage lenders typically want extra verification that their loan is secure with you.
Different types of mortgages and waiting periods
There are waiting periods involved in getting a mortgage after bankruptcy, which vary depending on the type of mortgage you are seeking. There is a 4-year waiting period for obtaining a conventional mortgage, and a 2-year waiting period for a Federal Housing Administration or VA mortgage.
A USDA mortgage is also an option, but your application will undergo heightened scrutiny if it is within 3 years of your bankruptcy. Chapter 13 bankruptcies have waiting periods, as well, that generally range from between 1 to 4 years.
There are many different situations that lead to the need to file for bankruptcy, such as a sudden illness, loss of a job or an unexpected event. A letter to a mortgage lender explaining your circumstances and what led to the bankruptcy filing could help.
Knowing that buying a house is still possible after bankruptcy is often what makes the difference between choosing to file or not. Life after bankruptcy has many advantages. Your qualifying debts will be wiped out and you will no longer face the stress and burden of financial difficulties. With a little patience and guidance from a qualified professional, your goal of buying a house can still be achieved.