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Chapter 13 Bankruptcy Conventional Loan

What Is A Jumbo Loan

How soon can you qualify for a mortgage after a Chapter 13 Bankruptcy?

A jumbo loan, or jumbo mortgage, is a mortgage loan that exceeds the limits set by the Federal Housing Finance Agency . Jumbo loans are called non-conforming loans because they dont conform to these limits.

Since jumbo mortgages dont have the guarantees that come with conforming loans, borrowers tend to be subject to greater scrutiny and may have higher borrowing costs. A jumbo loan may attract different investors than those who customarily buy conventional mortgage bonds.

What Are The Conforming Loan Limits

Fannie and Freddie set limits called conforming loan limits on how high your mortgage can be. Conforming loan limits vary by state and market. In 2022, you can only borrow up to $647,200 for a single-family unit in most parts of the U.S.

However, conforming loan limits go as high as $970,800 in Alaska and Hawaii, where the median price of a home is far above the national average. In other high-cost areas, loan limits are set on a county-by-county basis.

To find the conforming limits where youre looking to buy a home, check this FHFA map.

How Chapter 13 Bankruptcy Affects Your Mortgage Eligibility

In many cases, mortgage lenders will say yes to your loan application while you are still working through a Chapter 13.

Most mortgage lenders look more favorably on applicants who file Chapter 13 than those who file for Chapter 7 bankruptcy. Thats because Chapter 13 filers have made an effort to repay at least some part of their debts.

This is reflected in the minimum waiting period to get a loan after each type of bankruptcy:

  • Chapter 7 bankruptcy: 2-3 years after discharge
  • Chapter 13 bankruptcy: 12 months after filing

Of course, youll still have some extra hurdles to clear if you want to buy real estate while in Chapter 13.

A lender needs to see youve taken meaningful steps to improve your credit and debt management before it will approve you for a home loan.

The requirements to buy a house during or after Chapter 13 depend on the type of mortgage you hope to use.

Government-backed loans are more lenient about a Chapter 13 on your credit report, whereas conforming loans impose long waiting periods.

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Advantages Of Chapter 13 Bankruptcy

Basically, Chapter 13 buys you time to get your financial act together. It extends the amount of time you have to repay what you owe after the bankruptcy court issues its ruling.

Chapter 13 protects your loan cosigners against collection efforts if the bankruptcy settlement obligates you to repay the debt yourself. If you need to file a second bankruptcy, Chapter 13 has a two-year waiting period versus eight years for Chapter 7.

Its also possible to file a Chapter 13 bankruptcy after a Chapter 7 is completed, allowing you to seek a reduction in whatever debts remain from a Chapter 7 discharge.

What Is A Conforming Loan

Kentucky FHA Loans with A Chapter 13 Bankruptcy and Credit Score Down ...

A conforming home loan is one that meets, or conforms to, certain guidelines set forth by Freddie Mac and Fannie Mae.

Freddie and Fannie are the two government-sponsored enterprises that purchase mortgages, bundle and securitize them, and then sell them to investors through Wall Street and other channels.

When a loan meets the purchasing criteria used by the GSEs, it is said to be a conforming loan.

There are various criteria used to define a conforming mortgage product. But the size of the loan is one of the most important criteria, from a borrowers perspective.

Freddie Mac and Fannie Mae will only purchase loans up to a certain amount. These maximum amounts, or limits, vary by county and are updated every year.

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Conventional Loan After Chapter 13 Bankruptcy

Below are some of the basic requirements to get a conventional loan after a chapter 13 bankruptcy discharge:

  • The mandatory waiting period to get a conventional loan after a chapter 13 bankruptcy is 2 years.
  • Conventional loans require a borrower to have a credit score of 620 or higher.
  • The minimum down payment on conventional loans is typically either 3% or 5%.

Would you like to see if you qualify for a conventional loan? We can match you with a mortgage lender that offers conventional loans in your location.

What Happens To A Second Mortgage During Bankruptcy

In a Chapter 7 bankruptcy filing, your second mortgage probably wont be discharged, which means youre still responsible for repaying it, and the lender can foreclose on your home to get paid.

A Chapter 13 bankruptcy allows for lien stripping, which removes junior liens on your home. Since your first mortgage takes priority, you may be able to have the debt from your second mortgage discharged once you complete your repayment plan and have the second mortgage lien removed. This could be especially helpful if your home is underwater.

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Whats The Difference Between A Bankruptcy Filing Date And A Discharge Date

The filing date is the day you file a petition with your local bankruptcy court. The discharge date is the day youre no longer liable for the debts included in your bankruptcy. This date could be a few months after the filing date or several years later, depending on whether you file Chapter 7 or 13.

Conforming Loan Limits By County

Mortgage Approval Process On Manual Underwriting Chapter 13

Update: We updated this page on November 30 to include the revised conforming loan limits for 2022. Federal housing officials have increased the limits for most U.S. counties in response to rising home prices. Refer to the spreadsheet below for the new figures.

This website provides 2022 conforming loan limits by county, as well as FHA limits. In 2022, the baseline loan limit for most counties across the U.S. will be $647,200. Thats an increase of nearly $100,000 from the 2021 cap of $548,250.

More expensive real estate markets, such as New York City and San Francisco, have conforming loan limits as high as $970,800. Remote housing markets like Alaska, Hawaii and Guam also fall into this high-cost category.

Anything above these maximum amounts would be considered a jumbo mortgage.

The PDF and Excel spreadsheet files above were obtained from FHFA.gov. They are offered here as a convenience to our visitors. You can download them to your computer, in either format, and refer to them as needed.

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Getting A Mortgage After Bankruptcy

You may believe that filing for bankruptcy will prevent you from ever qualifying for a mortgage. Fortunately, this is not the case obtaining a mortgage after bankruptcy is possible. If you have filed for Chapter 7 or Chapter 13 bankruptcy, you may be able to obtain a mortgage after a certain waiting period.

To determine how your particular bankruptcy case will affect your ability to buy a house, it is in your best interest to contact Luftman, Heck & Associates at to speak to an experienced Ohio bankruptcy lawyer who can assist you with your life after bankruptcy.

Chapter 13 Bankruptcy Doesnt Ruin Your Mortgage Chances

If you filed for Chapter 13 bankruptcy or were recently discharged, you might wonder whether you can buy a new home or refinance.

The good news is, getting a mortgage is easier after Chapter 13 bankruptcy than Chapter 7.

You might even qualify while youre still in Chapter 13. Government-backed FHA, VA, and USDA loans let you apply for a mortgage as early as one year into your repayment plan.

Keep in mind, you need to make those payments on time. And you still need to meet loan requirements.

But if you meet these guidelines, you should have a good shot at getting a mortgage during or after Chapter 13.

In this article

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How Long After Bankruptcy Can You Buy A House

The waiting period to buy a house after bankruptcy depends on whether you filed Chapter 7 or Chapter 13 bankruptcy and the type of loan you seek. Waiting periods after Chapter 7 is discharged vary from two to four years. After Chapter 13 is discharged, some federal loans are available immediately, though a conventional loan requires a two-year waiting period.

The first step in qualifying for a home loan after bankruptcy is to have the bankruptcy judge discharge your case. Then comes the patience test, and the timeframe is determined by the type of bankruptcy you have and the type of loan you desire.

Chapter 13 And The Cares Act

Chapter 13 Bankruptcy FAQS

The federal government rolled out all sorts of Covid-19 relief packages, and the CARES Act made bankruptcy filings available to businesses and individuals affected by the pandemic.

Among other things, repayment plans were extended to seven years. The bill was signed in March 2020, and many provisions have expired. Your bankruptcy attorney should be able to apply any provisions that are still applicable.

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Chapter 7 Versus Chapter 13

Getting a mortgage is easier to do after a Chapter 13 bankruptcy than after a Chapter 7 bankruptcy. Government-backed mortgage options like FHA, VA, and USDA loans will often let you apply while in Chapter 13 as long as you are at least a year into repayment.

Chapter 7 filers typically have to wait a minimum of two years after the discharge of their bankruptcy to apply for a mortgage. Additionally, the applicant must prove that they have re-established a timely payment history. The other option is to incur no new debts within that time period, not even a credit rebuilder loan or credit card. Occasionally, a lender will accept a shorter time than two years if the borrower can show extenuating circumstances leading to the initial bankruptcy filing.

With Chapter 13, a mortgage applicant has to show 12 months of on-time payments to their bankruptcy repayment plan. A year is the minimum wait time before applying for a new mortgage loan. Waiting isnt the only requirement, though. Any borrower currently in Chapter 13 bankruptcy must acquire permission from the bankruptcy court before applying for a mortgage.

How To Obtain A Loan With An Open Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to get out from under an insurmountable debt that you cannot pay and also allows you to keep some assets, such as a home or car, provided you have a structured repayment plan that is acceptable to your lenders. However, having an open Chapter 13 bankruptcy can be a death sentence when you’re trying to apply for a loan. Most lenders won’t consider applicants with an open bankruptcy. Here is a comprehensive guide on some methods you can use to obtain a loan even if you have an open Chapter 13 bankruptcy.

Be prepared to explain your bankruptcy in detail to a lender. Have documentation showing the details of your bankruptcy proceedings available to provide to a lender when making your loan application. The more documentation you can provide showing your ability to repay a lender, the more seriously your application will be evaluated.

Have collateral on hand. Assets that are not pending under the bankruptcy ruling are the only assets that a lender might consider. Personal valuables, such as jewelry or antiques, are a way to collateralize a loan. Have those valuables appraised and be ready to show that documentation to a lender.

Talk to friends and family. Find someone in your life who might be willing to provide you with a personal loan or take out a loan on your behalf. Show him or her that you are serious about repayment by having a contract drafted showing your repayment proposition.

Tips

Warnings

References

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Bankruptcy Waiting Period Conventional Requirements

One of the most important things youll need to do is wait until your bankruptcy has been discharged. This means that the debt has been wiped out and youre starting fresh.

The amount of time you need to wait after your bankruptcy is discharged depends on the type of bankruptcy and your loan type.

A convnetional loan will require at least four years since your discharge date for a Chapter 7, and two years for a Chapter 13, before you can be considered for a mortgage.

We have other programs availalbe that require only a two year waiting period. 

Guide To Buying A House After Bankruptcy

Wells Fargo denied my mortgage refinance because chapter 13 bankruptcy

If youve had to declare bankruptcy, you may feel like youll never be able to get your finances in order again. And worse, you may feel like youll never have a house of your own again.

But the reality is that bankruptcy isnt a permanent mark on your financial record. Although your credit score will drop significantly when you declare bankruptcy, the Consumer Financial Protection Bureau found that those who declare bankruptcy often have higher credit scores when compared to those who try to work out difficult finances without resorting to bankruptcy.

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Do You Qualify For A Mortgage

Having a Chapter 13 bankruptcy in your credit history shouldnt stop you from getting a mortgage.

You might even be able to buy a home during Chapter 13 if youre in good standing with your repayment plan and you qualify for the mortgage.

If youve been working hard to pay down debts and improve your financial situation during Chapter 13, you might be able to get a home loan a lot sooner than you think.

How Are They Determined

The methodology for creating these limits is outlined within the Housing and Economic Recovery Act of 2008, or HERA. This act requires the Federal Housing Finance Agency to establish and maintain an index for tracking average home prices in counties across the country. In short, HERA ties loan limits to median home values.

In most cases, the conforming loan limit for a particular county is set at 115% of the median home value for the area. It cannot, however, be more than 50% above the baseline mentioned at the top of this page.

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When Can I Qualify For A Mortgage After Bankruptcy Short Sale Foreclosure Or Dil

Qualifying for a mortgage after financial hardship is normally only a matter of meeting a minimum waiting period.

The waiting period is determined by the nature of the financial hardship and the type of mortgage you are applying for.

If youre like most people that got caught up in one of the many financial crises in our lifetime, you were either directly affected, or know someone that was directly affected.

Many homeowners found themselves in serious financial hardship resulting in bankruptcy, foreclosure, deed in lieu, or short sale.

Often, bankruptcy is followed by the default of a mortgage, and the loss of a home to foreclosure, short sale, or deed in lieu.

It can get tricky knowing which waiting period applies and how to figure out the shortest waiting period possible.

This is a very popular subject as you can see if you scroll to the bottom of this article and see over 2,200 questions and answers dating back to early 2011.

Qualifying After Chapter 13 Bankruptcy

Ottenheimer Law Group: Chapter 13 Bankruptcy

We realize that qualifying for a mortgage after a Chapter 13 bankruptcy can be complicated, but thats where my team can step in. Metroplex is built to walk homebuyers through the qualifying process step by step.

We are able to offer specific experience and expertise on how to qualify for a mortgage after a bankruptcy. Please call or email with any questions or scenarios you may have.

Email: [email protected]

Make it a great day, and I look forward to seeing you next week!

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Life After Chapter 13 Bankruptcy

Chapter 13 can be useful for people with serious debts who worry about losing their homes to bankruptcy. If you adhere to your repayment plan, youll have a new lease on financial life.

Unsecured debts will be gone, but mortgages and car payments might linger. Hopefully, youll have developed the habits needed to meet those obligations.

Getting New Credit In Chapter 13

The court will permit you to incur new debt for personal, family, or household purposes if it is necessary for you to continue to make payments under your plan. Put another way, if you can demonstrate to the Chapter 13 trustee and the court that you need the credit so you can stay in the plan then the court is likely to allow you to incur it. For example, if you need a reliable car to get to work so you can earn money to make payments to the Chapter 13 plan, the trustee and court are likely to approve the car loan.

In most cases, you need to obtain the court’s permission before you incur substantial debts.

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Contact An Experienced Nyack Bankruptcy Attorney

If you are facing a bankruptcy Nyack bankruptcy attorney Robert S. Lewis knows how to work toward rebuilding your credit and getting your debts discharged. The Law Offices of Robert S. Lewis, P.C. can advise you on the best approach for your unique situation and will help you understand your legal rights, obligations, and responsibilities. We know how to navigate the bankruptcy system to ensure the most favorable outcome for our clients that will help their debts be forgiven, but allow them to hold onto a successful future. Do not hesitate to contact our office today by calling 845-358-7100 or submit an online contact form.

Work Toward Better Debt

Conventional Loans After Chapter 13 Versus Chapter 7 Bankruptcy

To have the best chance of getting a mortgage, youll want a history of different types of debt. After a few months of making payments on your secured credit card, you should apply for an unsecured card so you can show responsibility across multiple credit lines.

Next, you can apply for an installment loan, like a car loan. The key is to buy only what you can afford and pay it off at the end of every month.

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