You may be able to get a mortgage loan while you are still in Chapter 13 bankruptcy but the chance is quite small because most lenders and bankers would simply ignore your application when they see that you are in bankruptcy. Filing for bankruptcy should only be considered as the last resort when a person finds himself facing a lot of credit problems. However, in certain situations, it may be the only choice.
The two common kinds of bankruptcies that can be filed are Chapter 7 and Chapter 13. A Chapter 7 bankruptcy has been filed through the courts and will erase all existing debt. However, from the point of view of lenders, this is the worst kind of bankruptcy and it is not removed from your credit report until after 10 years have passed.
On the other hand, a Chapter 13 bankruptcy is where the debtor arranges to make some payments to a trustee. Usually, the debtor agrees to repay a certain percentage to what is due to the creditors. The payment process usually takes five years. Lenders are more lenient for Chapter 13 bankruptcy and the bankruptcy usually remains on the debtor's credit report for seven years.
For those who have filed a Chapter 7 bankruptcy, banks and lenders usually would ignore any application for a loan for two to three years. However, a person in Chapter 13 may be able to obtain a home loan through the Federal Housing Administration or FHA if the trustee allows it.
There are a number of requirements for someone in Chapter 13 bankruptcy to get a mortgage loan. First of all, you must obtain permission from your trustee and you must find a lender who will agree to finance your FHA loan. Also, you should not have any collections or any late payments after you have filed for bankruptcy. You must also have a payment history of at least one year. For example, you may obtain letters from your utility companies indicating that you have been prompt in your payments for the past 12 months. An important step to take is to get a copy of your credit report to make sure that there are no records of late payments or collections that have been recorded.