Filing for bankruptcy may allow you as a New Jersey resident to eliminate medical bills, a credit card balance or other financial obligations. However, doing so can also make it harder to qualify for a mortgage. In fact, you will have to wait at least a year after submitting paperwork to a bankruptcy court before you’re eligible to seek a home loan.
How long will you have to wait before you can apply for a mortgage?
If you file for Chapter 7 bankruptcy, it will be at least two years after the date you submit your petition before you can seek an FHA or VA loan. It will be at least four years from that date before you can seek a conventional mortgage. You will need to wait as many as four years after a Chapter 13 case is resolved to obtain a conventional mortgage.
You’ll need to meet other lender requirements
There is no guarantee that you’ll obtain loan approval after the mandatory waiting period has elapsed. A lender will want proof that you have the ability to manage your money and the resources available to make your payments each month. This minimizes the risk of a mortgage default, which may be even worse than a bankruptcy in the eyes of lenders. Generally speaking, you’ll need a credit score of at least 640 to obtain the best possible FHA, VA or USDA loan terms. However, you’ll want a credit score of at least 700 to get the best possible terms on a conventional loan.
Bankruptcy may make it easier to keep property such as a car, home or funds inside of a bank account. However, it may also impact your ability to obtain a home loan for several years after your case is resolved.