Best Mortgage Lenders for Bankruptcies

Jump straight to it: The best mortgage lender for bankruptcies is Angel Oak Mortgage Solutions.

If you have recently gone through bankruptcy, the dream of owning a home may seem impossible. Fortunately, there are several financial institutions that will provide loans to people who have filed for bankruptcy in the past — and the waiting period might be shorter than you think.

Whether it be through a bank statement loan or another special program, there are mortgage lenders for bankruptcies that can help you fulfill your dream of home ownership. Below, you will find five of the top home loan providers who offer choices for borrowers with bankruptcy on their financial record as well as a bit more info on how to recover after a period of financial hardship.

Quick Look: Best Mortgage Lenders for Bankruptcies

• Best for Flexible Mortgage Options: Angel Oak Mortgage Solutions
• Best for a Variety of Options: New American Funding
• Best for Self-Employed Borrowers: CrossCountry Mortgage
• Best for Short Waiting Periods: First National Mortgage
• Best for Online Mortgages: Rocket Mortgage

Best Mortgage Lenders for Bankruptcies

If you have a bankruptcy on your credit history it is important to know that you still have options when selecting the perfect lender for your new home. It’s a good idea to do your research to find the right loan program for your situation, and the lenders below all offer some kind of program geared toward helping buyers with less-than-perfect credit history purchase residential properties. 

While loan options are constantly changing, the following lenders can be a great place to begin your search for a home loan. 

1. Best for Flexible Mortgage Options: Angel Oak Mortgage Solutions

While they offer conventional loans, Angel Oak Mortgage Solutions’ specialty lies in offering specialized loans for people who don’t meet typical qualification standards because of income, credit or bankruptcy history. These are typically referred to as nonqualified mortgage (QM) loans.

For example, Angel Oak offers financial statement loans that allow buyers with a bankruptcy more than two years ago and/or a foreclosure more than one year ago to obtain financing. These loan programs allow you to submit a full financial statement and documents supporting your financial position beyond just your credit score.

Angel Oak also offers a bank statement loan, which is ideal for self-employed men and women as well as business owners who need to divert a large portion of their personal income to business-related investments and expenses. If you don’t have W-2s or a traditional source of income, Angel Oak’s mortgage payment options might be right for you. 

2. Best for a Variety of Options: New American Funding

New American Funding also offers non-QM loans that give you options if you have experienced a recent bankruptcy. Offering an Asset Verified Loan program, New American can also look at your complete financial picture to determine whether you are qualified rather than just checking a credit score. If you are struggling with mortgage payment, New American Funding can help.

This financial statement loan can take any savings (like stock market investments, retirement accounts and standard checking or savings accounts) into account when deciding whether you qualify for a loan or a refinance. In this case, typically six months’ worth of reserves are required to gain approval. 

New American also offers an interest-only loan option, which could provide you with an immediate loan option without having to wait for the typical two to four years after bankruptcy. With an interest-only loan, you have the option to pay toward the principal balance and obtain a conventional loan after the initial loan period is over. This is another helpful option for buyers with financial marks like bankruptcy on their records. 

3. Best for Self-Employed Borrowers: CrossCountry Mortgage

CrossCountry Mortgage specializes in offering loan programs for self-employed people through bank statement loans, full documentation loans, asset qualification loans and loans using just 1099 statements for contractors. Because it has a great deal of experience lending to people who don’t typically qualify for conventional loans, it is a great mortgage lender for bankruptcy. They also have their refinance programs for those looking to manage their credit card debt, student loans, or car loans more effectively.

If you have gone through efforts to repair your credit after bankruptcy, you may be eligible for their full documentation loan. This loan option helps you get back into a home sooner after demonstrating responsible financial management after bankruptcy. If you have significant assets that can offset the risk of your loan, you may be able to qualify using those properties and/or accounts.

4. Best for Short Waiting Periods: First National Bank of America

If you are looking for an immediate mortgage after bankruptcy, First National Bank of America (FNBA) could be one of your best choices. FNBA has the shortest published waiting period after a bankruptcy listed on its website — just one month. You could get started with the loan process just one day after bankruptcy and close on a new home mortgage in around 30 days.

FNBA’s program for borrowers with recent credit events are bank statement loans that require 20% down and a credit score of 600 are higher. If you have cash on hand to put down toward the purchase of your new home and can qualify, this loan option can help you get financing quickly after bankruptcy. While the down payment requirement may seem daunting for some buyers, FNBA allows for the use of gift funds. You can receive the down payment from a third party — family member or friend — which is not allowed by some lenders.

5. Best for Online Mortgages: Rocket Mortgage

Rocket Mortgage does not service non-QM loans that might allow for an immediate loan after negative financial events, but it is one of the nation’s largest providers of home loans. If it’s been at least two years since you filed for bankruptcy, Rocket Mortgage can help you explore plenty of conventional and government-backed home mortgage loan options. 

Rocket Mortgage offers FHA or VA loans just two years after bankruptcy. After four years, you will be eligible to apply for most loan types. Rocket Mortgage also has resources to help with credit repair, and its all-online process makes it easy to complete a mortgage application.

How to Get a Mortgage After Bankruptcy: 4 Steps

If you've gone through bankruptcy recently, you may wonder whether you can still get a mortgage. The answer is yes, but it may be more challenging than it would be for someone with a clean credit history. The key is to find a mortgage company that specializes in providing home mortgages to individuals who have gone through bankruptcy.

Step 1: Understand the Different Types of Bankruptcies

The key to getting a mortgage after bankruptcy is understanding the different bankruptcy filing types and how they impact your eligibility for various loan programs.

People can file two types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 is known as a straightforward bankruptcy and involves the liquidation of most of your assets to pay off your debts. Chapter 13 is a restructuring of your debts into a repayment plan. Both types of bankruptcy stay on your credit report for seven to 10 years.

Obtaining a Mortgage After a Chapter 7 Bankruptcy

If you have filed for Chapter 7 bankruptcy, you will have to wait at least two years after discharge to qualify for a conventional mortgage. However, if you're willing to go with a government-backed loan, such as an FHA or U.S. Department of Agriculture (USDA) loan, you may be able to qualify for a home mortgage after just one year. Keep in mind that these types of loans may require a higher down payment and interest rate.

Obtaining a Mortgage After a Chapter 13 Bankruptcy

If you have filed for Chapter 13 bankruptcy, you may be able to qualify for a mortgage sooner, as long as you have completed at least one year of payments on your repayment plan and have received permission from the bankruptcy court to take on new debt. Additionally, you will need to have a good credit history since filing for bankruptcy.

Step 2: Focus on Improving Your Credit Score

Start by reviewing your credit report in detail to understand your credit score, history and outstanding debts. You can obtain a free credit report once per year from the three primary credit bureaus: Experian, TransUnion and Equifax. Make sure to check your credit report carefully for any errors or inaccuracies, and dispute them immediately.

From there, you'll need to focus on making on-time payments on all existing credit accounts. You may also want to explore options for rebuilding credit. This can include opening a secured credit card or a obtaining credit-builder loan. These credit options are designed for people with poor credit who want to rebuild their credit. Keep in mind that credit-builder loans can be pricey. 

Remember, your credit score influences how likely you are to receive a mortgage approval and plays a critical role in determining the mortgage rate you will receive. Maintaining a stronger credit score can help you obtain a lower mortgage rate.

Step 3: Consider the Type of Mortgage Loan

Two main options are available to homebuyers with bankruptcies — a nonqualified home loan and a standard home loan.

Nonqualified Mortgage Loan

Nonqualified home loans are types of mortgages that allow borrowers who cannot qualify for a traditional mortgage to purchase a home. These loans are often granted to borrowers with credit scores that don’t meet the usual requirements, have irregular income or don't have enough documentation to verify their income.

Keep in mind that although nonqualified home loans provide an opportunity for people who have been unable to obtain traditional mortgages, they also carry higher interest rates. It's important to make sure you understand what you are getting into before committing to repayments.

Standard Mortgage Loan

If you decide to pursue a standard loan, you will likely be subject to a waiting period, which can provide ample opportunity to focus on repairing your credit and determine your ideal loan type. Below you will find the standard waiting period for each type of loan as well as the type of bankruptcy that each waiting period applies to.

• Conventional: four years for Chapter 7; two years for Chapter 13
• FHA: two years for Chapter 7; one year for Chapter 13
• VA Loan: two years for Chapter 7; one year for Chapter 13
• USDA: three years for Chapter 7; one year for Chapter 13

Step 4: Shop Around for a Mortgage Company

You'll need to find a lender that offers mortgages to homebuyers with bankruptcy on their record. Make sure to compare different lenders and their offers. A great place to start is with the mortgage companies outlined in this guide. 

Once you have identified potential lenders, gather all necessary documentation such as tax returns, pay stubs and bank statements. This will help demonstrate your ability to make mortgage payments and improve your chances of being approved.

How to Prepare for a Bank Statement Mortgage

As you prepare for a mortgage loan following bankruptcy, there are steps that you can take to improve your chances of finding an affordable home loan.

Prepare Your Documentation

Before you can apply for your mortgage loan, gather documents proving your assets. This may include bank statements, statements from retirement accounts and taxable brokerage accounts and documentation of business assets. The more assets you can prove you own, the more financing you may be able to take advantage of.

Save a Larger Down Payment

If you can afford to take some more time to save a larger down payment, you may be able to access lower rates.

Consult with a Loan Professional

If you aren’t sure which type of loan is right for you, consider consulting with both a qualified and non-QM lender to explore your options. After speaking with both types of lenders, you can compare your options directly and choose the loan that fits your situation.

Choose the Best Mortgage Lender After Bankruptcy

Finding the right mortgage lender after bankruptcy can be a daunting task, but it is not impossible. Despite the challenges that bankruptcy presents, there are lenders who specialize in working with individuals who have gone through this financial hardship. By conducting thorough research and understanding your options, you can find lenders that are willing to provide you with a mortgage that suits your needs.

Frequently Asked Questions