Those who file bankruptcy often fear their credit will be too damaged to qualify for a home mortgage before the bankruptcy comes off their credit report in 7 to 10 years.

The truth is that most who file bankruptcy can rebuild their credit within just a few years and qualify for a home mortgage. It depends on their financial circumstances and the regulations of the lending company.

Mortgage Lenders’ Bankruptcy Guidelines

Most mortgage lenders will lend to those with a bankruptcy on their credit report. It depends on your credit rating and how long it has been sent since your bankruptcy discharge.

The following is the standard timeline mortgage lenders use for borrowers who have filed bankruptcy. The time-frame depends upon the mortgage lender and the chapter of bankruptcy filed.

Waiting Period Exceptions

You should know that many mortgage lenders may reduce their standard waiting periods if you show that your bankruptcy was due to extenuating circumstances.

According to Fannie Mae guidelines, extenuating circumstances are “non-recurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.”

The types of extenuating circumstances may vary by the lender, but could include:

  • Medical crisis
  • Death of a spouse
  • Divorce
  • Job loss
  • Natural disaster

To prove your extenuating circumstances, the lender may request a letter explaining the circumstances leading to your bankruptcy. They may also request supporting documentation such as:

  • Medical bills
  • Death certificate
  • Divorce decree
  • Job layoff notification or severance papers
  • Insurance papers

Since lender requirements vary so much, it is important to discuss your financial circumstances with a lending agent. Do not assume that your bankruptcy will keep you from getting a home mortgage. Many lenders will see that you are on the road to financial recovery be willing to extend you credit.