Having a Chapter 13 bankruptcy in your past doesn’t mean that being a Florida homeowner isn’t in your future. Many people are able to get a mortgage after Chapter 13 Bankruptcy in Florida. Mortgage lenders know that no applicant is perfect and have processes in place to make home ownership possible. In fact, when faced with severe financial problems, individuals who file for bankruptcy often fare better in the years that follow than those who don’t file. A Federal Reserve Bank of New York Study showed, people who filed Chapter 13 incurred less damage to their credit score and ended up in better financial shape in the years that followed compared to those who didn’t.
The main factors in getting approved for a home loan after Chapter 13 bankruptcy in Florida are the type of home loan being applied for, and credit history post-bankruptcy.
Chapter 13 Bankruptcy Timelines and Seasoning Periods
In the mortgage industry, different lenders each have their own pre-determined “seasoning periods,” which determine how much time must pass after a bankruptcy before someone can be considered for a home loan.
Filing for Chapter 13 bankruptcy in Florida can be less of a hindrance compared to Chapter 7, with subsequently shorter seasoning periods. This is because the key difference between the two types is that Chapter 13 includes a plan to pay back at least a portion of the debt, rather than Chapter 7 which does not contain a repayment plan.
In Florida, bankruptcy proceedings alone can take as long as nine months before the negotiation between the debtor or the debtor’s counsel and the creditor is complete. The start of a seasoning period is based on how quickly the Florida District Bankruptcy Court can finalize your case and start your Chapter 13 bankruptcy plan.
How Soon Can You Get a Mortgage after Chapter 13 Bankruptcy in Florida?
Many people think they have to wait seven years after Chapter 13 before they can get a mortgage. This isn’t true. The myth comes from the fact that Chapter 13 records must be removed from your credit reports after seven years. The main issue is whether or not your lender has experience with Chapter 13 bankruptcy borrowers in Florida and what their seasoning periods are.
Context Matters with Chapter 13 Bankruptcy
This shorter time frame is especially true when the individual filed for bankruptcy due to an economic event or extenuating circumstances. What counts as mortgage-lender verified extenuating circumstances? Typically, extenuating circumstances are when the events are resolved, unlikely to happen again, and were beyond the individual’s control. In Florida, with several recent hurricanes battering the coast, including Hurricane Matthew and Hurricane Irma, many Floridians may qualify for these considerations. Other events such as a company-wide layoff, major illness or injury or the death of a wage-earning spouse can qualify.
Government-backed Loans and Assistance in Florida Following Chapter 13
Filing for Chapter 13 bankruptcy in Florida doesn’t exclude you from the benefits of government-backed home loans, such as FHA, VA and USDA loans. These government backed home loans typically have shorter seasoning periods following Chapter 13 than conventional loans. Low- to medium-income prospective buyers who’ve filed for Chapter 13 can obtain a low to no money down mortgage for a USDA home in rural Florida communities. Additionally, if you are still making Chapter 13 repayments, that doesn’t mean you can’t get a mortgage after Chapter 13 bankruptcy in Florida. To be eligible for an FHA home loan while still making Chapter 13 payments, it must be 12 months since the start of the your proceedings, all plan payments must have been paid on time. Further, you must receive permission from the bankruptcy court handling the case to apply.
Foreclosures in Florida
Even nearly a decade after the recession, Florida still struggles with high rates of home foreclosures. Seasoning periods after a foreclosure, either as part of a bankruptcy filing or separately, can be up to seven years, but contacting an experienced mortgage lender as many borrowers don’t know the exact rules surrounding when the clock starts to get them info a new home.
If you filed for bankruptcy and faced foreclosure at the same time, the seasoning period can occur at the same time. Meaning if you faced both, you do not have to wait the two years for the bankruptcy filing and then also the seven years for the foreclosure. Once again, being able to prove the foreclosure or foreclosure alternative was beyond your control, such as a hurricane or other extenuating circumstances, may shorten the time frame.
Rebuilding Your Credit to Buy a Home in Florida
The seasoning period doesn’t have to be seen as a barrier, instead consider it an opportunity to rebuild your financial foundation. Bankruptcy can cause a hit to your credit score. Regardless of being out of the official seasoning period, potential home buyers should still try to improve their credit score.
Those steps include ensuring payments are made on time, related to Chapter 13 repayment plans as well as any other money owed, as well as using secured credit cards and other financial products responsibly. Like anyone else, Floridians who’ve filed Chapter 13 should pull their credit reports regularly to ensure accuracy.
Bankruptcy doesn’t have to be the end. It was built to help Americans rebuild their lives following a financial disaster. The goal of owning a home in Florida can still be part of your American dream. Get on the path back to home ownership. Contact a trusted bankruptcy mortgage company that understands all the steps involved, and can help get you on the right track.