Declaring Chapter 7 or Chapter 13 bankruptcy is often devastating and can put your home buying plans on hold. A foreclosure, deed-in-lieu or short sale has a similar affect but can reduce the length of time before being eligible for a new home Loan. Going into bankruptcy can shut down your ability to borrow money or get a Credit card, severely lowering your credit score. It will take some time to build back enough credit to apply for a new credit card or to take out a new home loan. However, with proper preparation, patience and financial planning, you might be able to purchase a home sooner than expected. The table below illustrates the typical waiting periods for the different loan product types. Financing Waiting Periods* Occurrence Conventional FHA VA USDA Bankruptcy Chapter 7 of 11 - 4 years from discharge date Chapter 13 - 2 years from discharge date or 4 years from dismissal date Chapter 7 - 2 years from dischage date Chapter 13 - Minimum 12 months with satisfactory payout, court permission, amp; re-established credit history Chapter 7 - 2 years from discharge date Chapter 13 - Minimum 12 months with satisfactory payout, cour permission, amp; re-established credit history Chapter 7 - 3 years from discharge date Chapter 13 - If still open or within 12 months requires credit waiver Foreclosure 7 years 3 years 3 years 3 years Deed-in-Lieu of Foreclosure / Pre-foreclosure (Short Sale) / Mortgage Charge-off** 4 years 3 years 3 years 3 years * Extenuating circumstances may reduce waiting period, however, circumstances must be fully documented and approved through underwriting division.** Charge-off of a mortgage loan under Conventional products is subject to a 4-year waiting period. Discharge and Organize First things first: The bankruptcy must be discharged. If you are still in the process, or if you are still in credit counseling or any other program that takes over your finances, no mortgage lender will be able to assist you. Once your bankruptcy is discharged, organize and scrutinize your credit report. If there are debts that have been paid back but still appear on your report, contact the credit agency and have them corrected. While you’re at it, check for other mistakes on your credit report. You are entitled to one free credit report from each of the big three credit rating agencies each year—Equifax, Experian and TransUnion. If there is an error, dispute it online via the particular credit agency’s website. Rebuild Your Credit The fastest way to rebuild your credit score after a bankruptcy is to prove to creditors and other lenders that you can be trusted to pay back the money you owe them. You can do this two ways: secured credit cards and installment loans. A secured credit card gives you credit limited to the amount you have on deposit with the issuing bank. So, if you have $100 to $500 to place in an account with the issuing bank, then the bank will limit your credit each month to the amount of that deposit. An installment loan is simply one where you make installment payments each month. It can be a personal loan, car loan or student loan. If you get an installment loan, then you only need to do one thing: make your monthly payments on time. Wait at Least Two Years Here’s where you will need patience: You should wait at least 24 months after your bankruptcy is discharged to apply for a mortgage. You should wait at least 36 months if you lost your home to foreclosure, agreed to a deed-in-lieu or performed a short sale. You may be able to get a mortgage sooner but the terms, like interest rates, won’t be as attractive as they would be if you waited the full two or three years. Since you might be paying that mortgage interest for up to 30 years, you will save money if you wait long enough after the discharge to get a good interest rate. Note: Although the bankruptcy option may seem like a more attractive option in terms of time after discharge before qualifying for a new home loan, the bankruptcy will affect future credit for at least 7-years, whereas the alternative options are usually removed from your credit report after the two-to-three year period. Finally Applying For a Mortgage After the two-year period, make sure you are fully prepared to apply for a loan. Your lender will want you to meet certain criteria before agreeing to lend you money: A good debt-to-income ratio, stability and time on the job. Money in the bank and no bounced checks help tremendously, of course. Any retirement plans or 401(k) assets makes your credit look good as well. And remember, a big down payment carries a lot of weight. Keep that in mind during the two-year waiting period and save as much as you can.