We filed Chapter 7 bankruptcy. How long do we have to wait before we can get a mortgage?
Probably a good deal less time than you think. The number most people have in mind is ten years, because that is how long a Chapter 7 stays on a credit report. That is a different clock from the one mortgage lenders actually use.
The waiting period starts at your discharge date, not the day you filed. For an FHA loan, HUD's underwriting handbook sets a minimum of two years from discharge. VA loans commonly use the same two-year benchmark. USDA treats a Chapter 7 discharged within the past 36 months as adverse credit. A conventional loan backed by Fannie Mae or Freddie Mac carries the longest wait, at four years.
That means a household two years past discharge is already eligible for the two programs that ask the least money up front — 3.5 percent down on an FHA loan, and nothing down on a VA loan for those who qualify through military service.
There is also an exception path. When the bankruptcy grew out of a documented one-time hardship outside your control, such as a serious illness, an involuntary job loss or the death of a wage earner, the wait can be shortened. The VA can consider a file at one year on those grounds.
Two cautions are worth keeping in mind. Reaching the date only makes you eligible to apply. Approval still turns on rebuilt credit, steady income and some savings, so the waiting time is best spent making every payment on time and letting a small amount accumulate. And individual lenders are free to require more than the program minimum, which means a turndown at one lender does not tell you what the next one will say.
Before anything else, find your discharge paperwork and look at the date on it. A good many people count from the day they filed, and discover they have been eligible for months.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.