Bankruptcy Law and Real Estate: Home Ownership after Bankruptcy

Buying a home is just one of those things—if you work hard and put in the time, one day you will have enough saved for a down payment. In Miami, real estate is a great investment for those who qualify to take out a mortgage, but what if you’ve recently filed for Chapter 7 or Chapter 13 bankruptcy?  Depending on the specifics of your situation, obtaining a mortgage may still be possible shortly after you file. However, because real estate and bankruptcy law can be confusing, you should contact a local Miami bankruptcy lawyer. But first, let’s look at what individuals who have filed for bankruptcy commonly have to deal with during the home buying process.

The first thing you need to know is that you may be subject to a waiting period before you can get financing for a home. If you seek a loan through the Federal Housing Authority (FHA), or the Veterans Administration (VA) if you completed your enlistment with an honorable discharge, you will most likely have to wait two years after the final discharge of your debts before being approved for a loan. Other government-affiliated loan programs, such as Fannie Mae and Freddie Mac, often have a two- to four-year waiting period. Non-governmental mortgage options may not have an official waiting period, but they often require counseling that takes at least as long as the waiting periods of government programs.

Individuals who filed Chapter 7 bankruptcy will have had their assets liquidated and their debt wiped clean. If you filed Chapter 13 bankruptcy, you will have to make regular payments for three to five years before your debt is erased. However, after 12 months of paying on time, the court may allow you to increase your debt with a mortgage. Whether you file for Chapter 7 or Chapter 13, having a bankruptcy on your record doesn’t mean you can’t save for the future. In fact, rebuilding your finances should start right after you file.

The waiting period may seem like a major inconvenience at first, but if you use that time wisely, your finances and credit will benefit. While you are waiting for loan approval, you should start to rebuild your credit and save for the down payment, closing costs, taxes, and other home-buying expenses that you will incur. Calculate how much you need to budget in order to afford a down payment and monthly payments, and then research the mortgage options available to you to find the one that is right for you.

Though it may seem like a tough feat, buying a home after filing for bankruptcy is not impossible. With a detailed plan, you can start to reestablish your credit and save for a new home almost immediately. However, because every bankruptcy case is different, you should consult with a professional before proceeding. At AM Law, we understand how stressful bankruptcy can be, especially for those looking to buy a home. Our attorneys are experts in Miami real estate and bankruptcy law, so call us today and see that it is possible to move on and buy a new home after bankruptcy.