by Houtan Hormozian | Aug 26, 2025 | CRESTICO, Mortgage
Facing bankruptcy can feel like a major setback, especially when your dream is to own a home. The uncertainty about your financial future and credit score can be overwhelming. But here’s the good news: bankruptcy is not a permanent roadblock to securing a mortgage. At Crestico, we believe in second chances, and our team of Real Estate and mortgage experts is here to show you that buying a house after bankruptcy is an achievable goal.
This guide will demystify the process, outline the necessary waiting periods, and provide a clear action plan to get you back on the path to homeownership.
Understanding Chapter 7 Bankruptcy and Mortgage Eligibility
Chapter 7 bankruptcy, often called a “liquidation” or “fresh start” bankruptcy, is designed to wipe away most of your unsecured debts, like credit card balances and personal loans. While this provides significant financial relief, it leaves a serious mark on your credit report, where it can remain for up to 10 years.
For mortgage lenders, a recent Chapter 7 filing signals a higher risk. As a result, they impose a mandatory “seasoning period” before they will consider your home loan application.
- Conventional Loans: Typically require a waiting period of 4 years from the discharge date.
- FHA & VA Loans: Offer a much shorter waiting period, usually just 2 years from the discharge date.
- USDA Loans: Generally require a waiting period of 3 years post-discharge.
What lenders look for after the waiting period: Your goal during this time is to prove your financial recovery. Lenders will want to see a solid history of on-time payments for any new credit, stable employment, and a healthy debt-to-income (DTI) ratio. Demonstrating that the bankruptcy was a one-time event caused by circumstances beyond your control (like a medical emergency or job loss) can also strengthen your application.
The Chapter 13 Bankruptcy Path to a Mortgage
Chapter 13 bankruptcy is a “reorganization” plan. Instead of liquidating assets, you enter into a court-approved plan to repay a portion of your debts over a three- to five-year period. Because you are actively repaying creditors, lenders often view a Chapter 13 filing more favorably than a Chapter 7. This can open doors to mortgage eligibility much sooner.
- Getting a Mortgage During Chapter 13: Believe it or not, this is possible. Lenders like the FHA may approve your mortgage application after you have made at least 12 months of on-time payments under your repayment plan. You will also need permission from the bankruptcy court trustee.
- Getting a Mortgage After Chapter 13: Once your Chapter 13 plan is complete and discharged, the waiting periods are generally shorter than with Chapter 7.
- FHA & VA Loans: The waiting period can be as short as 2 years from the discharge date, though some lenders may consider you even sooner.
- Conventional Loans: The waiting period is typically 2 years from the discharge date or 4 years from the dismissal date.
Your Post-Bankruptcy Action Plan: Rebuilding for Mortgage Success
Simply waiting out the required period isn’t enough. You need to actively rebuild your financial profile to become an attractive borrower. Here are the essential steps our mortgage advisors at Crestico recommend:
- Re-establish Your Credit (Wisely): Your credit score will take a significant hit after bankruptcy. The best way to rebuild is to open two or three new lines of credit. A secured credit card is an excellent starting point. Use it for small, planned purchases and pay the balance in full every single month. This demonstrates responsible credit management.
- Monitor Your Credit Report: Sign up for a credit monitoring service and check your reports from all three bureaus (Equifax, Experian, and TransUnion) regularly. Ensure all discharged debts are correctly reported as “discharged in bankruptcy” with a zero balance.
- Maintain Stable Employment: Lenders prioritize stability. A consistent two-year history of employment, preferably with the same employer or in the same field, shows you have a reliable source of income to handle future mortgage payments.
- Save, Save, Save: A larger down payment can significantly improve your chances of approval. It reduces the lender’s risk and shows your commitment to the investment. Saving also helps cover closing costs and establishes a healthy financial cushion.
- Keep Your DTI Ratio Low: Your debt-to-income ratio is the percentage of your gross monthly income that goes toward paying your monthly debt payments. After bankruptcy, keep this ratio as low as possible by avoiding new car loans or other significant debts.
The Crestico Advantage: Your Partner in Homeownership
Navigating the mortgage process after bankruptcy can be complex, but you don’t have to do it alone. The rules vary by loan type and lender, and having an experienced guide on your side is critical.
The team at Crestico specializes in helping clients in all financial situations. We understand the nuances of FHA, VA, and conventional loans post-bankruptcy and have strong relationships with lenders who are willing to look beyond the numbers. We can help you create a personalized roadmap to rebuild your credit, determine the right time to apply, and position you for a successful mortgage approval.
Don’t let a past bankruptcy define your future. Contact Crestico today for a free, no-obligation consultation, and let’s take the first step toward your new home together.
by Lilly Miller | Nov 8, 2019 | CRESTICO
If you are at the same time excited and terrified at the prospects of purchasing your first house, don’t worry, you are not the only one. This is probably the largest financial venture you will undertake so it is natural to be a bit nervous and to wish to research everything in detail so you can feel comfortable as much as possible. With that in mind, here is a list of certain expenses you need to keep in mind when you are planning the budget for your first home.
Prepare for the down payment
Everyone who has purchased a house, vehicle or other more expensive asset had to prepare for the down payment. It represents a portion of your new house’s price which is paid upfront and it can go up to 20 percent of that sum. For instance, if the house costs $200,000, the down payment would be $40,000 and if you saved up that amount, that means that you would have to acquire another $160,000 through a bank loan or some other financial scheme. Both your savings and the manner you would obtain the rest of the sum is something you need to plan for in advance to make sure you come up with the optimal solution when it comes to monthly installments and the length of the payment period.
Keep in mind the house insurance
Taking out home and contents insurance is a small pre-purchase step which could mean a lot in case something happens. One of the most important features you should pay attention to is the 24/7 assistance, while others that could be of use include temporary accommodation in case the damage is substantial and counseling after a traumatic event. The insurance costs vary varies from property to property, and you can click here for home and contents insurance reviews to get more familiar with the conditions and choose the option which would suit you the most. Some things you need to ensure your new home and belongings against are fire, earthquake, storm, flood, and make sure you read the small print and to know exactly what is covered by the insurance.
Anticipate building inspection costs
Since you are buying a house for the first time, you probably don’t have much experience with assessing the offer and there is a reasonable fear among many people when they start looking for the first property that they might overpay for a place. This is why building inspection is a perfect manner to check the structural soundness so you don’t pay too much for a house that is essentially better to be knocked down and built again. These inspections usually cost up to $600 which is not a big amount, considering that it gives you peace of mind regarding a long-term investment that is much larger.
Don’t forget the moving expenses
In all the commotion regarding finding the perfect place and arranging the finances to purchase it, many people forget about moving. Since your belongings won’t magically appear in your new home, you need to take it very seriously, as well as the incurred expenses. Besides a lot of hard work related to decluttering, organizing items and cleaning the place, you will need packing supplies and a truck or a moving crew to transfer your things to the new place. Also, some people go for moving insurance, just to make sure they are safe if anything gets broken or damaged during a move, which is not impossible, having in mind the amount of (semi)fragile belongings that you might have.
When you think you’ve found your dream house, before saying ‘I do’ to it, sit and think about all the expenses and plan your budget well so you can make sure that you having everything under control. That is the only manner you will be able to truly enjoy your new house and to consider it ‘home sweet home’.
by CRESTICO | Aug 2, 2013 | CRESTICO
Section 129B(d) of TILA, as added by the Dodd-Frank Act, permits consumers to bring actions against individual mortgage loan originators for violations of certain provisions of TILA. For example, while LO’s can be held personally liable for receiving compensation in violation of the Rule, they are not personally liable under TILA/LO Comp for failing to maintain the records of compensation required by the rule. The LO Comp Rule, which implements the DFA’s statutory authority confirms this personal liability through its changes to Reg. Z’s definitions. Specifically, the change to § 1026.36 (a)(1)in the LO Comp Rule clarifies the definition of “loan originator” to mean either the individual LO or the company. The following is from the CFPB’s small business compliance guide which seeks to use plain language explanations for the Rule (although it still warns you that you need to see the actual Rule for details): “A “loan originator” is either an “individual loan originator” or a “loan originator organization.” “Individual loan originators” are natural persons, such as individuals who perform loan origination activities and work for Mortgage Brokerage firms or creditors. “Loan originator organizations” are generally loan originators that are not natural persons, such as mortgage brokerage firms and sole proprietorships”
TILA is confusing for a lot of reasons, but one of the biggest areas of confusion in the LO Comp and Ability to Repay rules are the differing obligations imposed on “Creditors”, “Loan Originators”, and “Loan Originator Organizations”. These definitions are critical in determining who is responsible for any obligation under TILA. LO comp is one of the few times where the obligation extends all the way down to the individual LO, but the liability is potentially huge. I don’t know about the issue from the LO’s perspective (ask an attorney; see below) – does the borrower have a life of loan defense? As best I understand it, the life of loan defense is true as it relates to foreclosure but the remedy is not a free house, it is three years of interest and other fees (loan, attorney) – a monetary judgment. So there shouldn’t be any runs on any particular company.
Attorney Brad Hargrave (MedlinHargrave) writes, “Loan originator compensation is one area of Truth in Lending and Regulation Z wherein someone other than a creditor; namely, the loan originator, can also be held liable for a violation. The citation in support of this proposition is found at 15 USC §1639b(d)(1) which provides, in pertinent part, that ‘for purposes of providing a cause of action for any failure by a mortgage originator, other than a creditor, to comply with any requirement under this section, and any regulation prescribed under this section, section 1640 shall be applied with respect to any such failure by substituting ‘mortgage originator’ for ‘creditor’ each place such term appears in each such subsection.’ And, §1640 is that section of TILA that imposes civil liability for various TILA violations, including those sections regarding LO Compensation. (I have not addressed the recoupment and setoff issues in the event of foreclosure in the context of the LO, given that an LO would not be the party initiating the foreclosure; and thus, this section really isn’t applicable to an LO).”
Mr. Hargrave’s note continues, “The penalties are potentially severe. In an individual civil action brought by a consumer, the creditor who paid the violative compensation could be liable to the borrower for actual damages, plus twice the amount of any finance charge in the transaction (capped at $4,000), plus an amount equal to the sum of all finance charges and fees paid by the consumer (unless the creditor can demonstrate that the failure to comply is not material), plus reasonable attorneys’ fees and court costs if the borrower were to prevail. The loan originator’s exposure to such a claim (per 15 USC § 1639b(d)(2))is the greater of actual damages to the consumer or three times the total amount of direct and indirect compensation paid to the LO in connection with the subject loan, plus the costs to the consumer of the action, including reasonable attorneys’ fees. In addition, the CFPB could sue the creditor and the loan originator in Federal District Court and seek any one of a number of remedies, including restitution and/or disgorgement, and appropriate injunctive relief, as to all loans wherein the LO received unlawful compensation. It is also possible that the matter could be referred to another agency for enforcement.”
by CRESTICO | Aug 1, 2011 | CRESTICO
Buying a home can be very exciting! It’s part of the "dream" we all have for ourselves, the marriage, the family, the pet, the white picket fence – all of these things are dependent on having a home. Having means owning, not renting; to those of us wishing to make the most of our hard-earned money. But making the most of your money is not always easy – it takes a little bit of savvy and a lot of consideration.
Consideration means research, research and some more research. You need to know the facts. Not just about the home you are buying, but also the city, community, history and future projections, to help you determine whether this investment is right for you. While buying a home is not permanent – it is long term and you need to make sure the home you select matches your long-term lifestyle choices.
Budgeting – this is key! You do not want to get yourself into a home you cannot comfortably afford, or you will end up working and never being home to enjoy it; or unfortunately even potentially risking losing it or other valuable items in your life.
•Get familiar with home buying terminology. Know the difference between the types of loans, insurance, Interest Rates and programs available to you.
•Figure out your budget. Work with your loan consultant to determine what you can actually afford to pay on a monthly basis. Remember, a mortgage payment is not just principal and interest, there are taxes and insurance that will need to be paid. Also, the community you select a home in may have a homeowner’s association that charges a monthly fee. These are all in addition to the increased utilities, maintenance and potentially security costs that go along with owning a home. Remember, there no "super" to call when that toilet gets clogged!
•Get rid of your old bills! You’ll have lots of new bills to replace those! Try to pay off all your existing credit card bills. The less debt you have, the better loan you will qualify for.
• Read your paper work. HUD has a handy booklet on its site called "Buying Your Home: Settlement Costs and Helpful Information." It describes the home buying and settlement process and explains most of the expenses you will encounter. Although your lender will give you a copy, it’s a good idea to read it before you even consider applying for a loan.
• Ask questions. Make sure your loan and Real Estate consultants are the kind of people who take the time to explain every single step of the process and answer each of your questions. They are there to serve YOU! Buying a home is a serious decision and the people helping you should appreciate the opportunity to serve you. The service you receive should be attentive, respectful and consistent!
by CRESTICO | Aug 1, 2011 | CRESTICO
The National Association of Home Builders ("NAHB") recently reported that Americans still believe in home ownership.
Americans still believe that a strong housing industry means more jobs and more money to keep local economies growing, and that the government should continue to promote homeownership through tax incentives.
A new survey found that nearly three out of four American voters—73 percent—believe that it is reasonable and appropriate for the federal government to provide tax incentives to promote homeownership.
And 81 percent of voters are convinced we should do more to improve the housing finance system because we need policies that encourage homeownership if we want to rebuild the middle class.
"Every new single-family home built creates three full-time jobs and increases the property tax base that supports local schools," said National Association of Home Builders (NAHB) Chairman Bob Nielsen, a home builder from Reno, Nev. "The American public recognizes that to restore the health of the economy, we need policies that support opportunities for homeownership."
The poll, which was conducted on behalf of NAHB, also found that an overwhelming majority of respondents oppose eliminating the mortgage interest deduction and would be less likely to support a candidate for Congress who wants to do away with this vital tax incentive.
"Despite the current housing downturn, Americans still see homeownership as a key building block of being in the middle class and creating strong jobs in their communities," said Celinda Lake, president of Lake Research Partners, which conducted the survey along with Public Opinion Strategies.
Other key survey findings include:
•75 percent of voters say that owning a home is the best long term investment they can make.
•73 percent of voters who do not now own a home say that it is a goal of theirs to eventually buy a home.
•Among voters who are aware of proposals under consideration by Washington policymakers to raise the down payment requirements for a home loan, 92 percent believe it will make it more difficult to buy a home.
Neil Newhouse, partner and co-founder of Public Opinion Strategies, said, "The administration and some in Congress are floating plans to curtail or even abolish the mortgage interest deduction and impose changes that would make it much more difficult and expensive to get a home loan. This is in direct opposition to the views of most Americans, who want the government to encourage growth in the housing market and to maintain tax incentives to keep housing affordable."
http://www.nahb.org/generic.aspx?sectionID=1047&genericContentID=162180
