How to Get a Home Loan After Chapter 13 Bankruptcy

You can be approved for a new home loan after a Chapter 13 bankruptcy -- but not right away. Mortgage companies will want to see that you have been rehabilitated by the bankruptcy experience and that you are again ready to take on significant new debt. Do that by creating small new credit accounts -- such as gas station cards or department store cards. Add other credit cards later and use them all responsibly by making small charges and paying the cards off in full each month.

Instructions

1

Order your credit report and score. Get a free copy of the report from Annual Credit Report, a website created to offer free credit reports under the Fair Credit Reporting Act. Visit the website to view and print your report. Order your credit score separately, for a fee.

2

Compare your credit score to generally accepted standards for being approved for a home loan -- generally 620 at a minimum and preferably 720 or higher. It's possible that mortgage lenders may hold you to an even higher standard because of the Chapter 13 bankruptcy.

3

Improve your credit score, possibly, by correcting any errors on the report. Do this by writing a letter of complaint to the credit bureau at its address on the credit report. The MSN Money website reports that people emerging from bankruptcy are often surprised to see that their credit reports are listing accounts as open and past due -- even though the accounts were discharged through the bankruptcy. Write the credit bureau and insist that errors such as these be corrected.

4

Meet with a nonprofit credit counselor to create a plan for being approved for a home loan. The plan could include strategies for improving your credit score, if necessary, or eliminating new debt that you have incurred since the Chapter 13 bankruptcy. Get a referral for a reputable nonprofit counselor from a bank or credit union -- or see the same agency that counseled you during your required Chapter 13 pre- and post-filing counseling.

5

Show that you have established sound credit habits by paying your rent or mortgage payment on time for at least 12 consecutive months over a two-year period. Pay all credit accounts on time while avoiding more than two past-due payments over the two-year period. Avoid any additional negative information from being added to your credit report, such as a new charge-off, collection account or judgment.

6

Apply for a new mortgage after at least a two-year waiting period following the Chapter 13 bankruptcy. The Neighborhood Partnership Housing Services, a nonprofit housing counseling agency, reports that mortgages backed by Fannie Mae require the waiting period. Mortgage companies can set their own lending standards, but the Fannie Mae guideline establishes a standard.