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MustangX50

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Can I qualify to assume a mortgage after a bankruptcy in 2013?

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Mortgage Assumption After Bankruptcy

This really depends on two things, 1) the type of mortgage and whether or not it is freely assumable, assumable subject to lender approval, or not assumable at all, and 2) the type of bankruptcy and whether or not the bankruptcy was discharged or dismissed.  If the mortgage you want to assume has an assumability feature, you'll want to find out if it is freely assumable or assumable subject to the lender's approval.  If it is assumable subject to the lender's approval, you'll likely pay an application fee and be subjected to the credit requirements of the mortgage owner.  As for the type of bankruptcy and whether or not the case was discharged or dismissed, you'll see more on how that works below.

Traditionally the waiting period to assume or obtain a mortgage requires a waiting period of one to 10 years.  For shorter waiting periods, you'll typically be working with a portfolio lender or private individual with higher interest rates (or otherwise less desirable terms).  There are even some portfolio lenders that do not require any waiting period, but for compensation of the risk associated with the bankruptcy, they will require a larger spead between the value of the home and the balance of the mortgage (referred to as loan-to-value or LTV). 

FHA and VA mortgages - which have some of the best assumability features depending on the age and type of mortgage - will require a minimum two year waiting period after a discharged Chapter 7 bankruptcy with less time for a discharged Chapter 13 bankruptcy that was paid as agreed. 

Conforming mortgages (i.e., loans targeted for sale to Fannie Mae or Freddie Mac) will require a four year waiting period from discharge or dismissal for a Chapter 7 or 11 bankruptcy.  There are some extenuating circumstance allowances that will lower the waiting period to two years (extenuating circumstances would include things like death, disaster, disease, etc.).  For a Chapter 13 bankruptcy, Fannie and Freddie require you to wait two years if the bankruptcy was discharged or four years if dismissed (with an extenuating circumstance allowance down to two years from the dismissal date). 

Non-conforming mortgages (loans not eligible to be sold to Fannie Mae or Fredie Mac), usually referred to as jumbo loans, require a four to 10 year waiting period.  The reason for the large range is because non-conforming loans are based on the risk tolerance of the bank/banker providing the mortgage.  For example, most large national banks will typically require a seven year waiting period following a bankruptcy discharge or dismissal. 

Mortgages are not typically freely assumable.  Freely assumable means the mortgagee (the lender and/or servicer) does not have to approve the assumption.  Most mortgages with assumability features require some type of application and qualification process.  If you haven't spoken with the mortgagee/servicer about the assumption, that would be your first step.  Other than some FHA, USDA/RDA, and VA loans, fixed rate mortgages are generally non-assumable by design.  Some adjustable rate mortgages come with assumability features while others do not.

I assume you've already discussed your assumption plans with the person obligated on the mortgage.  If you haven't already done so, speak with the mortgagee/servicer to find out if there is an assumability feature (and assuming the obligated person doesn't know).  If there is, find out the type of mortgage and from there you'll have a good understanding of the waiting period following a bankruptcy.

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Not likely since a bankruptcy adversely affects your credit score for 10 years and it has been only two or less years since you filed yours. 

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