Can I Buy A House With A Co-Signor After Filing Chapter 7 Bankruptcy?

Buying a house after filing for Chapter 7 bankruptcy can be challenging, but it’s not impossible, especially with the help of a co-signer. However, there are several factors to consider and steps to take to improve your chances of obtaining a mortgage:

1. Waiting Periods:

After a Chapter 7 discharge, you’ll need to adhere to waiting periods before you can qualify for most types of mortgages:

• FHA Loans: Typically, you need to wait two years after the bankruptcy discharge before you can apply for an FHA loan.
• VA Loans: The waiting period for a VA loan is usually two years after discharge.
• Conventional Loans: For conventional loans, the waiting period is typically four years after discharge.

2. Credit Rebuilding:

Post-bankruptcy, it’s crucial to focus on rebuilding your credit. This includes paying all your bills on time, possibly obtaining a secured credit card, and keeping your credit utilization low. A higher credit score can improve your chances of loan approval and secure more favorable terms.

3. Employment and Income Stability:

Lenders will look for stable employment and income when considering you for a mortgage. You’ll need to demonstrate that you have a reliable income sufficient to cover your mortgage payments and other living expenses.

4. Down Payment:

Having a substantial down payment can improve your chances of mortgage approval. It reduces the lender’s risk and demonstrates your financial commitment to the property.

5. The Role of a Co-signer:

A co-signer with good credit and stable income can significantly improve your chances of obtaining a mortgage. The co-signer agrees to take on the responsibility of the loan if you default, which reduces the risk for the lender. However, it’s crucial that both you and the co-signer understand the responsibilities and risks involved. If you fail to make payments, the co-signer will be liable for the debt, which can strain personal relationships and harm the co-signer’s credit.

6. Consult with Professionals:

Before proceeding, it’s wise to consult with a financial advisor or a bankruptcy attorney to understand how buying a home fits into your post-bankruptcy financial plan. A mortgage broker can also provide guidance on the loan options available to you.

Example Scenario:

John, who recently received a Chapter 7 discharge, wants to buy a home. He has a stable job and has been rebuilding his credit. His sister, Mary, with a strong credit history and stable income, agrees to co-sign the mortgage. Two years after the discharge, they apply for an FHA loan. The lender considers Mary’s credit and income in addition to John’s improved financial situation, approving them for the mortgage.

While filing for Chapter 7 bankruptcy can make obtaining a mortgage more challenging, it’s not out of reach, especially with the help of a co-signer. By understanding the waiting periods, working diligently to rebuild your credit, saving for a down payment, and finding a reliable co-signer, you can increase your chances of becoming a homeowner post-bankruptcy.