Conventional Loans After Bankruptcy

Conventional Loans After Bankruptcy: Waiting Periods Explained

This guide will cover getting qualified and approved for conventional loans after bankruptcy. The road to homeownership post-bankruptcy can feel overwhelming. Still, you can qualify for a conventional loan with adequate prep work. Neither Chapter 7 nor Chapter 13 bankruptcies create a permanent barrier to securing a mortgage. Dale Elenteny, a senior mortgage loan originator at GCA Forums Mortgage Group, says the following about getting approved for conventional loans after bankruptcy:

Conventional loans issued by Fannie Mae and Freddie Mac have specific waiting periods and post-bankruptcy requirements that must be satisfied to ensure borrowers have stabilized their finances. Here is a breakdown of the waiting periods for conventional loans after Chapter 7 and Chapter 13 bankruptcies, including dismissals, so you know what steps to take next.

There are waiting period requirements to qualify for conventional loans after bankruptcy. The waiting period requirements differ among the types of bankruptcy and the outcome. For example, the waiting period depends on the type of bankruptcy: Four years after Chapter 7 bankruptcy discharge and two years after Chapter 13 bankruptcy discharge. In the following paragraphs, we will cover conventional loans after bankruptcy.

What Are Conventional Loans?

Conventional loans are mortgages not backed by government organizations like the FHA, VA, or USDA. Typically, they have a minimum credit score requirement of 620, a debt-to-income ratio (DTI) of less than 50%, and a down payment of 3 to 5 percent. Government-backed loans have less strict guidelines, so conventional loans have longer waiting periods after bankruptcy. Knowing these requirements is essential to improving your financial profile and qualifying for a mortgage.

Conventional Loans After Bankruptcy

Conventional Loans After Bankruptcy Waiting Period Guidelines

As with any loan type, the conventional loan waiting period starts on the discharge or dismissal date, not the filing date. Discharge means you have completed the set bankruptcy process; meanwhile, a dismissal means the bankruptcy was not completed (i.e., the person failed to meet a court requirement). The following are the specific waiting periods for rigid Chapter 7 and flexible Chapter 13 bankruptcies, including dismissals.

Waiting Periods for Chapter 7 Bankruptcy

Chapter 7 bankruptcy, sometimes called liquidation bankruptcy, involves selling an individual’s non-exempt assets to pay creditors. This type of bankruptcy is generally used by people who do not have much income but have a lot of debt they need to pay, like credit card debts or medical bills. A conventional credit card loan can be applied after 10 years of filing for Chapter 7, though it will stay on record for 7 years.

• Conventional Loans after Bankruptcy Standard Waiting Period: The standard waiting period is 4 years post-discharge.
• This gives time for the individual’s financial behavior to be accountable to him.
• Conventional Loans After Bankruptcy with Extenuating Circumstances: Suppose the debtor neglects x amount due to some exceptional circumstance like a debilitating illness.
• In that case, the waiting period can be reduced to 2 years post-discharge.
• Tentative Timeframes for Filing Chapter 13 Bankruptcy
• As a “wage earner’s plan,” Chapter 13 bankruptcy comprises the formulation of a repayment plan to pay off some of your debts over three to five years.
• It is specifically for people with a steady income and those who want to safeguard certain assets.
• A Chapter 13 bankruptcy stays on your credit report for approximately 7 years
• Conventional Loans After Bankruptcy Discharge Waiting Period: 2 years following the discharge date.
• This period is shorter because borrowers have shown financial responsibility by completing their repayment plans.
• Conventional Loans After Bankruptcy Dismissal Waiting Period: 4 years following the dismissal date.
• After this period, if your Chapter 13 case was dismissed (say, due to missed payments or adherence to the repayment plan), lenders view this as a risk, resulting in longer waiting periods.
• Dismissing Reasons: Documentable extenuating reasons for the dismissal can reduce the waiting period to 2 years after the dismissal date.

Conventional Loans After Bankruptcy: Multiple Bankruptcies

Suppose you have filed multiple bankruptcies in the last 7 years. In that case, the waiting period for a conventional loan is 5 years from the most recent discharge or dismissal date. In some cases, documented extenuating circumstances may shorten this period to 3 years. Keep in mind that multiple bankruptcies by co-borrowers (such as one bankruptcy each) do not count as “multiple bankruptcies” for this rule.

Additional Requirements for Conventional Loans After Bankruptcy: Post-Bankruptcy

Meeting the waiting time is only one step toward qualifying for a conventional loan after bankruptcy. Other additional requirements include the following.

• Re-established Credit: Credit must be rebuilt with a minimum FICO score of 620.
• Do not miss payments after bankruptcy, as that can disqualify you.
• Secured credit cards, authorized user accounts, or credit-builder loans will raise the score.
• Stable Income and Employment: Lenders focus on consistent income and employment history to ensure mortgage affordability.
• Debt-to-Income Ratio: DTI must generally be below 50%.
• Some lenders prefer 43% or lower.
• Down Payment: Primary residences need 3-5%, second homes need 10%, and investment properties need 15-25%.
• No New Derogatory Credit: Approval can be jeopardized with late payments or a foreclosure filing post-bankruptcy.

Since a post-bankrupt lender has to work with the borrower on the specifics of the loan, these loans bear special consideration because Fannie Mae and Freddie Mac’s Automated Underwriting System (AUS) virtually determines eligibility.

Tips to Prepare for Conventional Loans After Bankruptcy

• Check Your Credit Report: Obtain your credit report by going to AnnualCreditReport.com and checking for discrepancies, such as claims that should have been wiped off.
• If you notice anything wrong, fight it immediately because time is essential.
• Rebuild Credit Strategically: Make payments on time to ensure no blunders in all the accounts.
• Credit card utilization should be kept at a cap of 30%.
• Save for a Down Payment: Lower interest rates can be secured when the application is enhanced by paying a larger down payment, such as 10-20%.
• Work with a Mortgage Professional: Those who have dealt with post-bankruptcy financing can be more useful.
• They know the kinder lenders and can walk you through the steps you need to take.
• Document Extenuating Circumstances: Collect documents like medical expenses and lay-off documents to justify a shorter waiting time if they apply.
• Alternatives to Conventional Loans: If the waiting period for a conventional loan seems to take too long, try government-backed loans that have shorter waiting requirements:

FHA Loans

After a Chapter 7 discharge, they require a 2-year wait (1 year with extenuating circumstances) or 1 year of on-time Chapter 13 payments with court approval.

VA Loans

After Chapter 7 discharge (1 year with extenuating circumstances) or 1 year of Chapter 13 payments, a 2-year wait is required.

USDA Loans

They require a 3-year wait after Chapter 7 discharge or 1 year of Chapter 13 payments.

Non-QM Loans

• Some non-qualified mortgage (non-QM) lenders may offer loans immediately after bankruptcy but expect larger down payments (20-35%) and higher interest rates.
• Non-QM loans may also have more relaxed credit and down payment terms, making them accessible to borrowers still improving their financial profiles.

Why Trust This Information?

This guide uses the most recent 2025 policies published by Fannie Mae and Freddie Mac and reliable resources from the mortgage industry. Our team has extensive experience in personal finance and mortgage lending and strives to provide trustworthy advice and equip you with reliable information to reach your homeownership goals.

Waiting periods for planning are 4 years after the Chapter 7 discharge, 2 years after the Chapter 13 discharge, or 4 years after either dismissal (possibly 2 years with extenuating circumstances). Qualifying for a conventional loan after a Chapter 7 or Chapter 13 bankruptcy is achievable with a little patience and proactive financial control. You can effectively plan by understanding the timelines. Begin improving your credit, set aside money for a down payment, and work with a mortgage advisor to prepare yourself for a positive outcome.

Reach out to a post-bankruptcy mortgage lender if you would like them to support you personally. Alternatively, you can check the rules by visiting Freddie Mac or Fannie Mae. Your aspirations of owning a house are attainable!