Question: In 2020 I lost my job and went into bankruptcy. But now I am back on track and I would like to buy a house. Is it even possible to get a mortgage?

Yes, it is possible to get a mortgage after bankruptcy.

For a conventional mortgage, a lot depends on the type of bankruptcy. For Chapter 7 bankruptcy (you’ve sold your assets to discharge your debts as much as possible), typically, you have to wait four years, but it is possible that your situation could qualify as extenuating circumstances.

For Chapter 13 bankruptcy (you’ve completed your debt repayment plan), you generally need to wait two years from the discharge date. This period is shorter for FHA, VA, and USDA loans.

You’ll also need a 620 minimum credit score for a conventional loan, so keep your balances low on credit accounts and always pay on time. For FHA loans, a credit score of 580 is permissible, and your score could be as low as 500 if you have a 10 percent down payment.

You’ll need a cash down payment. With FHA loans, this could be as little as 3.5 percent.

Another type of loan can benefit people coming out of bankruptcy if they have cash on hand. The non-qualifying mortgage loan (non-QM) is suitable for people in special circumstances, typically self-employed people who don’t have pay stubs but do have a lot of cash and a high credit score. It can also benefit those with cash and a high credit score but a recent bankruptcy.

In 2022, here were the characteristics of the typical non-QM loan:
* Average credit score was 771
* Average down payment 24 percent
* Average Debt-to-Income (DTI) ratio was 37 percent

You generally need a DTI of 43 percent or less to finance a house. A good DTI is about 35 percent or less. You calculate DTI very simply: Monthly debt payments divided by gross income. Add up all the payments you make in a month, including student loans and child support, but don’t include utilities, groceries, and gas.