People file for bankruptcy for a variety of reasons both personal and business. Although there are many rules regarding bankruptcy and home buying it is still possible to purchase a new home if you have filed for or gone through bankruptcy in the past. We discussed the topic with some of our licensed loan originators in Grand Rapids & Brighton, MI to find out how bankruptcy affects mortgage qualification.
The first thing to understand is that there are different types of bankruptcy that individuals can file. The two types of bankruptcy that we will discuss today for the purposes of mortgage qualification are Chapter 7 & 13.
Chapter Seven Bankruptcy: Chapter 7 is designed to eliminate a person’s unsecured debts often including credit card & medical bills. To file chapter 7 the applicant must usually have little to no disposable income. Those people who earn too much money are often required too use Chapter 13.
Chapter Thirteen Bankruptcy: Chapter 13 is a process for re-organizing a payment plan for the debtee to pay back their debtors at least a portion of their debt in an organized format. This form of bankruptcy is typically for those individuals who have a regular income. Many people who earn too much money to qualify for chapter 7 are obligated to file for this option. Chapter 13 is a benefit for home owners because it allows them to keep real estate property including non-exempt assets.
Both forms of bankruptcy have many more rules and regulations click the link to explore more.
When it comes to mortgages & bankruptcy it is always best to be as open and honest with your bankruptcy attorney or mortgage loan officer so they can give you the correct information about your personal situation. At Treadstone Funding our loan originators are here to help with your questions regarding mortgage qualification & bankruptcy and can assess which mortgage programs you may qualify for.
Want a printable flyer that explains mortgage qualification after bankruptcy? Click here.