Does chapter 7 prevent me from getting a mortgage with a co-signer?

If you lost your house when you filed bankruptcy, or if filing bankruptcy put your dreams of getting a home on hold for many years, it's natural to wonder if a co-signer with good credit is the answer you have been looking for.

It seems like mortgage lending guidelines have changed quite often in recent years, but one thing has remained constant and that is that lenders are more and more conscious of managing risk in lending. You may be able to find a smaller lender, or a private lender who is willing to take you on with a co-signer, but the real trick to getting a mortgage after Chapter 7 is to begin almost immediately rebuilding your credit, and your reserve funds.

• You can rebuild your credit by careful use of revolving and installment credit, when it is extended to you.
• Make sure you always make your payments on time.
• Never maintain a balance higher than fifty percent of the available balance.

For a conventional loan, mortgage lenders today are following government guidelines which say that if there is more than one borrower on a mortgage loan, the lender needs to get each borrower's credit score. Usually each of the three credit reporting agencies (Experian, Equifax and TransUnion) will report slightly different scores. The lender takes the middle score for each borrower, and then uses the score from the borrower with the lower score to define interest rates for the loan.

• Example: Person 1 credit scores are 600, 620, 640. Person 2 credit scores are 700, 720, 740.
• The lender takes the middle score from each person, 620 and 720 respectively in this example.
• The lender uses 620 as it is the lower score of the two.

FHA loans do not have the same emphasis on credit scoring, however you will pay mortgage insurance for the first five years of your loan, regardless of the amount of your down payment.

Get Legal Help

If you have not yet filed for bankruptcy, talk to a bankruptcy attorney so that you can understand the benefits you can receive from bankruptcy as well as a clear understanding of the consequences. If your bankruptcy filing is already behind you, contact a local mortgage lender to find out if you qualify for a mortgage loan, or what you would need to do in order to qualify.