How To Secure a Mortgage After Bankruptcy Despite Low Credit Scores

Experiencing bankruptcy can be a challenging and overwhelming ordeal, and one concern that often arises afterward is the ability to secure a mortgage. How can you secure a home loan when your credit is rock bottom? From established traditional banks to private hard money lenders providing hard money loans, it may feel as though finding a financial institution willing to take a chance on you is a challenging endeavor.

While bankruptcy can significantly impact your credit scores, it’s not an insurmountable obstacle when obtaining a home loan. Bankruptcy doesn’t prevent anyone from getting a home loan; it just makes it more challenging. You can still attain your dream home and find a lender to take that risk with the right terms. This article will explore strategies for securing a mortgage after bankruptcy, even with low credit scores.

The Impact of Bankruptcy on Credit Scores

Before delving into securing a mortgage post-bankruptcy, it’s crucial to understand the impact of bankruptcy, including its potential effect on credit scores. Bankruptcy, whether Chapter 7 or Chapter 13, can significantly decrease credit scores, possibly reducing up to a hundred points or more. This can create a challenge when seeking approval from traditional mortgage lenders or exploring options such as hard money loans, especially for individuals with recent bankruptcies noted on their credit reports.

Work Hard in Rebuilding Credit

After bankruptcy, rebuilding your credit should be your top priority because it is the foundation of mortgage approval. To ensure accuracy, start by checking your credit reports from all three major credit bureaus—Equifax, Experian, and TransUnion. Look for any errors or inaccuracies that could further hinder your credit recovery. Then, develop a strategy to improve your credit scores gradually. Timely payments, low credit utilization, and responsibly managing existing credit accounts are key factors in rebuilding credit.

Give Time for Credit Recovery

Most mortgage lenders prefer to see a waiting period after bankruptcy before even considering an application, so a little patience is key. For a conventional loan, it’s typically around two to four years after Chapter 7 bankruptcy and two years after Chapter 13 bankruptcy. During this time, focus on rebuilding your credit and saving for a down payment.

Explore FHA and VA Loan Options

Federal Housing Administration (FHA) and Veterans Affairs (VA) loans are often more forgiving regarding credit scores and bankruptcy histories. FHA loans, for instance, can be obtained as soon as one year after Chapter 13 bankruptcy discharge and two years after Chapter 7 discharge, provided you meet certain requirements. The FHA loan requirement in PA only requires a 3.5% down payment with a credit score of 580. If your credit score is less than 580, you can still qualify for an FHA loan; however, you may be required to make a bigger down payment upfront. This will make homeownership in Pennsylvania possible even with a bankruptcy history. VA loans may also offer opportunities for eligible veterans with recent bankruptcies to secure financing.

Work with a Mortgage Broker

Mortgage brokers can be invaluable allies in your quest for a post-bankruptcy mortgage. These professionals have access to a wide network of lenders and can help you find options that match your unique situation. They are familiar with lenders who specialize in working with individuals with lower credit scores or recent bankruptcies, increasing your chances of approval.

Demonstrate Financial Stability

Lenders want to see that you’ve learned from past financial difficulties and are now financially stable. This includes having a consistent income, manageable debt levels, and a responsible approach to credit. Document your income, employment history, and any additional assets you possess. These factors can help offset the negative impact of your bankruptcy on your mortgage application.

Offer a Larger Down Payment

A larger down payment can make your mortgage application more attractive to lenders, as it reduces their risk. Saving up for a substantial down payment demonstrates your commitment to homeownership and can improve your chances of approval, even with a bankruptcy history. Now is the time to consider increasing your income with side hustles and selling valuables like jewelry, designer items, and other precious assets to increase your down payment funds. 

Consider Co-Signers or Guarantors

A co-signer or guarantor with a strong credit history can also enhance your mortgage approval prospects. Their financial stability and creditworthiness can assure the lender that the loan will be repaid. However, it’s essential to understand that the co-signer or guarantor is equally responsible for the loan.


While securing a mortgage after bankruptcy with low credit scores might present challenges, it’s far from impossible. By diligently rebuilding your credit, waiting for the appropriate time, exploring alternative loan options, and demonstrating financial responsibility, you can position yourself for mortgage approval. Remember that each lender has their criteria, so shopping around and seeking expert advice from mortgage brokers can open up a world of possibilities. With patience, determination, and a strategic approach, you can overcome the hurdles of bankruptcy and move closer to achieving your dream of homeownership.


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