How to Get Approved for Home Loan While in Chapter 13

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When you file for Chapter 13 bankruptcy, you must make an effort to repay your debts by adhering to a strict repayment schedule. The repayment schedule lasts from three to five years, depending on the amount of your debts and income. After this time period, the bankruptcy will be discharged. Unfortunately a bankruptcy is considered a very derogatory item on a credit report and will damage your credit score. Your credit information is the primary criteria that a lender will examine before approving you for a mortgage loan. By working on your credit and finding the right lender, you can get approved for a home loan prior to your Chapter 13 bankruptcy discharge.

Things You'll Need

  • FICO scores
  • Credit reports

Wait a minimum of one year before seeking financing. Most lenders will not finance a mortgage to a borrower currently in a Chapter 13 bankruptcy who is not able to demonstrate at least a year of perfect payments.

Request permission from the bankruptcy court to seek mortgage financing. If your request is approved, the court will give you a letter stating the amount that you are permitted to borrow.

Purchase your credit reports and FICO scores. Although you may receive one free credit report each year from the credit reporting agencies, this credit report does not reflect your FICO scores. A lender will evaluate your FICO scores to determine whether or not you are eligible for a mortgage loan.

Request your free credit reports from annualcreditreport.com. Examine your credit reports for derogatory entries other than the bankruptcy. Dispute with the crediting reporting agencies any of the negative items you find that you do not recognize. If the creditor reporting the item is unable to validate it, the entry will be removed and your score will improve.

Call the lenders you are interested in applying with for mortgage financing. Ask about their requirements concerning credit. Also ask if they extend financing to individuals who are currently involved in a Chapter 13 bankruptcy. This will help you identify the lenders who are most likely to approve your application for a home loan.

Apply for a mortgage loan with the lenders with whom you meet the requirements. Expect to be charged a higher interest rate on your home loan due to your bankruptcy.

Tips & Warnings

  • The credit scores you receive directly from the credit bureaus are consumer credit scores, not FICO scores. These scores may differ from the FICO scores that lenders use to evaluate your mortgage application. Your actual FICO scores can be purchased from myFICO.com.
  • You may dispute items on your credit report that you do not recognize even if those debts were included in your bankruptcy.

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