Generally, whenever a bank or mortgage company is looking into whether to give someone a mortgage or not, they look no further than a borrower's application and credit report. There are a lot of different factors that the lender takes into account:
- Credit Score
- Credit History (length of oldest account, etc.)
- Payment History (have you been making your payments on time?)
- Bankruptcy
- Income to Debt ratio (Can you afford this loan?)
- Other
For a complete and exhaustive list, you may want to contact a mortgage broker.
Government Back Loans
While there are many factors that are up in the air, there are a few "definites." For example, an FHA or HUD backed loan will not be given to anyone that has filed a Chapter 7 bankruptcy in the three years (minimum) prior to the loan application.
I've been told by mortgage people that this is a bright line rule; i.e. it doesn't matter if you got a great job since your bankruptcy and are making more than enough to cover the payment. So, if you are seeking a government backed loan, you will not be allowed to be on a mortgage loan, even with a cosigner.
If you're seeking a loan that is not government backed, it gets more complicated. Private banks have their own internal policies determining who does, and does not get a loan. It is almost entirely in the hands of their underwriters, and there is no way to determine it ahead of time. There are things that you can do to help though. If you are fresh out of a bankruptcy, the important thing to do is repair your credit score. There are many ways to do this. Here is what I suggest to my clients:
1. Pay your utility bills; many of them report to the three credit bureaus
2. Take out a credit card with a SMALL line of credit; keeping it small means you will be able to manage the monthly payments
3. If you reaffirmed any debts in the bankruptcy, make sure you pay them. Filing a chapter 7 does give you the great relief of a fresh start, but it is ultimately up to you to repair the damage of everything that happened before filing.
To learn more, check out our section on Getting Credit Cards, Loans, and Mortgages After Bankruptcy.
