How to Qualify for an FHA Loan After Bankruptcy
If you filed a Chapter 13 bankruptcy, you must wait one year before you can get a loan from the Federal Housing Administration (FHA). But if you filed for Chapter 7 bankruptcy, you’ll probably need to wait two years, unless there are special circumstances.
Of course, you’ll also have to rebuild your credit in order to qualify, but people can and do get FHA loans after bankruptcy.
How to get an FHA home loan after bankruptcy
Getting a mortgage after bankruptcy is challenging but possible. To secure an FHA loan, you’ll need to meet credit requirements and also complete a “waiting period” from the time the court issues your bankruptcy discharge.
With conventional mortgages, the waiting period can be anywhere from two to four years, but for an FHA mortgage, it can be much shorter. How much shorter depends on whether you filed Chapter 7 or Chapter 13.
After Chapter 7
Chapter 7 is the most common for individuals, especially for people without steady incomes. It protects your house, car and other essentials, but you usually need to sell off luxuries, like a second car or artwork.
You must usually wait two years after discharge of a Chapter 7 bankruptcy to qualify for an FHA loan (although there are exceptions — see below).
Mortgage lenders will also need a letter of explanation on why you declared bankruptcy and what changes you’ve made to get your finances in better shape. Specifically, they will want to know:
- Did the borrower re-establish good credit? Taking steps to recover your credit after bankruptcy will help you qualify for a loan.
- Did the borrower avoid new credit? Lenders will think twice about lending to someone who declared bankruptcy but is now juggling multiple credit accounts.
Review our Chapter 7 bankruptcy guide for more details.
If your finances were wrecked due to a situation outside of your control, you may be able to qualify for an FHA loan in as little as 12 months. Examples include:
- Serious illness or medical bills
- Death of a spouse who is the primary earner
- Home damaged by a natural disaster
You’ll need to provide documentation to back your claim, such as a copy of your medical bills or a death certificate.
After Chapter 13
Chapter 13 bankruptcy is often better for people with steady sources of income. It has you commit to a repayment plan and pay off your creditors over three to five years, while holding onto your assets.
But you don’t need to wait until the end of the repayment plan for a mortgage. You can qualify for the FHA home loan once 12 months (and 12 monthly payments) have passed since the repayment plan was put in place.
Mortgage lenders will look to see if you’ve made your payments on time. You’ll also need written permission from the bankruptcy court to enter into the mortgage.
For more information, review our guide to Chapter 13 bankruptcy.
FHA loan requirements
After you’ve finished the waiting period, you’ll need to meet the following requirements to qualify for an FHA loan:
| Minimum credit score |
|
| Income requirements | N/A |
| Debt-to-income ratio | 43% (exceptions available up to 50% with higher credit scores and cash reserves) |
| Property requirements | Must be safe and must be a primary residence |
Other home loans after bankruptcy
Although FHA loans are likely the easiest option after bankruptcy, you may be eligible for one of the mortgages below. Remember, though, that the waiting period may be longer.
| Conventional mortgage | VA loan | USDA loan | Non-qualifying mortgages | |
|---|---|---|---|---|
| Minimum credit score | 620 | 500 | None, but lenders recommend 640 | Varies by lender |
| Down payment | 3% minimum | 0% in most cases | 0% in most cases | Ranges between 10% and 25% |
| Income requirements | Varies | Varies | Varies | Varies by lender |
| Debt-to-income ratio | 45% | 41% unless there are extenuating circumstances | 41% unless there are special circumstances | Not required |
| Property requirements | Primary or investment | Primary | Primary | Primary or investment |
Improving your finances after bankruptcy
If you have to declare bankruptcy, give yourself some grace and focus on rebuilding your finances (and your future). A 2024 LendingTree study found credit scores generally improve after bankruptcy, but you may need to do more to find real financial health and qualify for a mortgage:
- Work with a nonprofit credit counselor: A nonprofit credit counseling agency can help you learn critical financial skills. Many also offer advice on buying homes.
- Create a budget: Managing your money and avoiding debt is usually much easier if you use a budget.
- Boost your savings: Even a small emergency fund can help you avoid debt the next time you’re hit with unexpected expenses. Setting aside as little as $100 can be a great start, but three to six months’ worth of expenses is safest if you afford it.
- Apply for a secured credit card: Secured credit cards can help rebuild your credit history, even with a damaged credit score, and they avoid the risk that you won’t have enough money to repay the debt.
- Set up automatic payments: Setting up reminders and signing up for autopay (if you’re sure you can cover the payments) can help you avoid missing due dates so you can build good credit.
Frequently asked questions
Depending on your situation and the type of bankruptcy you declare, you may qualify for an FHA loan in 12 or 24 months after your bankruptcy discharge date.
Yes, you can get a conventional, VA or USDA loan after declaring bankruptcy, but it will usually take much longer than if you applied for an FHA loan.
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