Everyone needs a second chance – especially home buyers. Life happens. I get it. And if life has happened to you in the form of a bankruptcy, foreclosure or debt that sunk your credit score, there are a few things to know if you are looking to buy a home.
I’ve worked with countless homeowners who have had a financial set back and know there are still options to apply and qualify for a mortgage.
Low Credit score
It would be great if everyone had a perfect credit score, but let’s be real – stuff happens and sometimes that shows up on your credit report. Maybe you were late paying a medical bill or had a late car payment that went to collections.
Different loan types have different rules when it comes to late notices, collections charge offs or more that could impact your loan approval. For things like late payments and collections, the most recent 12 months have the most impact.
As a lender who has helped thousands of people buy homes, my advice is don‘t give up hope of owning a home. Know the rules, make a plan and it can happen.
Bankruptcy
Here’s what most people don’t realize about having a bankruptcy on their credit. It doesn’t prevent you from owning a home.
If you had a Chapter 7 bankruptcy – where you liquidate assets – the standard waiting period before you can purchase a home is between two to four years. Depending upon the loan type, that time frame can be shorter with extenuating circumstances.
If you had a Chapter 13 bankruptcy – which is where you reorganize your debts – the standard waiting period can be two to four years, as well. But if you’ve been making your payments for 12 months, some loan types allow you to buy sooner.
Foreclosure
If you had a foreclosure in the past, here’s what you need to know about owning a home again.
The standard waiting period for VA loans is two years and FHA and USDA loans require three years.
A conventional loan requires seven years to pass but VA and FHA and conventional loans will allow someone to buy sooner if there are extenuating circumstances.
If any of these scenarios describe your situation, give me a follow and reach out to me. One set back doesn’t mean you can’t move forward with homeownership.