Yes. You can buy a house after a bankruptcy, and with FHA the wait after a Chapter 7 is 2 years from the discharge date, the day the court wiped out the debts. During a Chapter 13, FHA, VA and USDA can approve a purchase before the repayment plan is even finished.
Waiting periods by program
| Program | Chapter 7 | Chapter 13 |
|---|---|---|
| FHA | 2 years from discharge; as little as 12 months with documented extenuating circumstances | 12 months of on-time plan payments plus written court approval |
| VA | 2 years from discharge; 1 to 2 years possible with reestablished credit and a cause beyond your control | 12 months of on-time plan payments plus trustee or court approval |
| USDA | 3 years (36 months) from discharge | 12 months of on-time plan payments plus court or trustee permission |
| Conventional (Fannie Mae) | 4 years from discharge or dismissal; 2 years with extenuating circumstances | 2 years from discharge, or 4 years from dismissal |
The rules come from HUD Handbook 4000.1, VA's Lenders Handbook, USDA's HB-1-3555 and Fannie Mae's Selling Guide. Extenuating circumstances means a one-time event outside your control that cut income or raised expenses sharply, such as a serious illness or the death of a wage earner. Fannie Mae allows no shortcut on the 2 years after a Chapter 13 discharge, and more than one bankruptcy in the last 7 years means a 5-year wait for Conventional.
A worked example two years after a Chapter 7
A buyer's Chapter 7 was discharged 25 months ago. Since then they've opened a secured credit card with a $25 minimum and financed a car at $380 a month, and their middle score has climbed to 612. They earn $4,600 a month.
The bankruptcy erased the old card and medical balances, so the only debts counted are the $405 a month opened since. FHA's ratios allow:
- Housing: 46.9% of $4,600 is $2,157.40.
- Total: 56.9% of $4,600 is $2,617.40, and after $405 of debts that leaves $2,212.40 for housing.
The housing ratio is the tighter of the two, so the house payment can reach $2,157.40. Here's a $280,000 single-family home in Marion County at a 5.75% rate on a 30-year fixed, with 3.5% down, taxes at 0.85% and insurance at $230 a month:
| Payment piece | Amount |
|---|---|
| Down payment (3.5%) | $9,800 |
| Total loan with 1.75% upfront MIP | $274,928.50 |
| Principal and interest | $1,604.41 |
| Monthly mortgage insurance (0.55% a year) | $123.84 |
| Property taxes | $198.33 |
| Homeowners insurance | $230.00 |
| Total payment | $2,156.58 |
That total sits just under the $2,157.40 limit, and with the $405 of other debts the total ratio is 55.7%, inside 56.9%. This buyer can shop up to about $280,000 one month after reaching FHA's 2-year mark.
How a Chapter 13 purchase works
In a Chapter 13 you repay creditors through a court-approved plan, usually over three to five years. FHA, VA and USDA let you buy once 12 months of plan payments are on time and the court or trustee signs off on the new mortgage. The plan payment counts as a monthly debt. On $5,000 of monthly income, a $410 plan payment uses 8.2% of FHA's 56.9% total ratio, leaving plenty of room for a house payment. When the plan is finished and discharged, that payment drops off, and Conventional opens 2 years after the discharge.
Rebuilding credit before you apply
Lenders want to see new credit handled well after a bankruptcy. Two or three accounts paid on time, such as a secured card plus a car loan or a credit-builder loan, give an underwriter that record. Keep card balances low, since utilization moves the score quickly, and keep every payment on time.
Check that each discharged account shows a $0 balance and a note that it was included in the bankruptcy on all three bureaus. A discharged debt still showing a balance drags down your score and can sneak into your ratios until it's corrected. The FHA requirements guide has the rest of FHA's rules, and the credit score guide shows what each score tier changes.
If your discharge date is close to the 2-year mark, call AAA Capital Funding at 888-601-8344 with the date. We'll tell you the first day you can close and run your price in the affordability calculator, so you can shop the day you're eligible.