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Filing for bankruptcy can be a frightening thing for many Miami families, largely because it can be hard to determine what might happen next after filing. Those who lose their home to foreclosure or short sale have the same kind of fear. Will the black mark of bankruptcy haunt them forever? Many believe that there is an automatic ten year wait before there is any chance of owning another home, but often this is not true.

While a Chapter 7 bankruptcy will remain on a credit report for ten years, the bankruptcy is not the only thing that a lender will look at when considering someone’s loan application. Many lenders are open to offering a loan much sooner than that, as long as everything else in a person’s credit report looks good.

Most home loans fall into one of three categories; VA loans, FHA loans, or Conventional loans. The time limits to wait for a new loan possibility is different depending on whether a person experiences a foreclosure, a short sale, a Chapter 7 bankruptcy without a foreclosure, or a Chapter 13 bankruptcy without a foreclosure. Those who have a foreclosure, short sale or chapter 7 bankruptcy can often qualify for a new loan in 2-3 years. Those who have filed a Chapter 13 bankruptcy and have made all required payments for 12 months can apply for VA or FHA loans before their bankruptcy is even discharged.

For conventional loans, the waiting period can be longer, usually 4-7 years unless there are extenuating circumstances. While bankruptcy is usually not a person’s first choice when it comes to getting out of debt and reclaiming their financial independence, it is not quite the steel door that many believe it to be. Those who can show that they have really turned over a new leaf can move on and reclaim the American dream.

Source: Lake Spokane Outpost, “Buying A Home After Bankruptcy, Foreclosure or Short Sale,” Michael Mullin, Dec. 5, 2012