The Basics

• The two major types of home loans used in the U.S. are government-insured loans, such as those guaranteed by the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA); and conventional, non-government-insured loans held by Fannie Mae or Freddie Mac. The two most common bankruptcy filings are Chapter 7 and Chapter 13. Chapter 7 liquidation involves no repayment of debt, whereas the Chapter 13 is a court-established repayment plan. Chapter 7 is generally more serious and requires a longer seasoning, or waiting, period to refinance.
  
  

Conventional Loans

• Loans owned by Fannie Mae or Freddie Mac have the same seasoning requirements. As federally-sponsored corporations, Fannie and Freddie provide the funds for conventional mortgages. A homeowner must wait four years after the discharge date of Chapter 7 bankruptcy to refinance her home with a conventional loan. For Chapter 13, the borrower must wait two years after the discharge date. For the unsuccessful completion of a Chapter 13, which leads to dismissal rather than discharge, the borrower must wait four years to refinance.
  
  

FHA Loans

• FHA-insured mortgages are generally more flexible in their underwriting than conventional loans, as the government promises to repay the lender for its losses in the event of homeowner default. After Chapter 7 bankruptcy discharge, the borrower must wait at least two years before refinancing with one of FHA's insurance programs. The required seasoning for a Chapter 13 is two-fold: for manually underwritten loans, the borrower does not require discharge, but must be at least one year into the repayment period. For loans submitted through FHA's automatic underwriting software system, the seasoning requirement for Chapter 13 is two years.
  
  

VA Loans

• Loans guaranteed by the federal government for military veterans are similar to FHA loans in their flexible seasoning guidelines. To qualify for a refinance with the VA, from either a conventional or existing VA loan, the borrower must wait at least two years after Chapter 7, or be one year into the payout period on a Chapter 13.
  
  

Considerations

• Underwriters for both conventional and non government-insured refinances require borrowers to have re-established good credit and document an on-time payment history for all new debts, in addition to satisfying seasoning requirements. They also require written explanation of the circumstances which led the borrower to declare bankruptcy.
  
  Lenders may make exceptions for borrowers that can document extenuating circumstances led to them filing for bankruptcy. Such cases include the death of a wage earner or chronic illness which led to substantial medical debt.