Can I do Nomad with a bankruptcy?
Often times, the reason why someone may find themselves in the Catch Up Nomad position is because of some financial setback that happened in the past. Many times this results in a Catch Up Nomad in having a past bankruptcy.
So, the next logical question is: can someone do the Nomad model if they’ve had a past bankruptcy?
The answer is: yes, you can do the Nomad model if you’ve previously had a bankruptcy.
Loan programs vary over time such that loan programs that are available today might not be available tomorrow and loans programs that don’t exist today may be available tomorrow.
With that being said, there are loan programs, like FHA, where you can get a loan 2 years after your Chapter 7 bankruptcy has been discharged. You can get an FHA loan with 1 year of on-time payments during a Chapter 13 bankruptcy with the approval of the bankruptcy court. It is my understanding that these same rules also apply to VA loans.
For USDA loans, you’ll need to wait three years from the date of discharge of your Chapter 7. However, you can get a USDA loan with just 12 months of on-time payments on your payment plan for a Chapter 13 bankruptcy. You can also get a USDA loan a year after the Chapter 13 has been discharged.
So, you’ll be able to get your first Nomad property relatively easily after bankruptcy (your first two if you and your spouse are alternating loans). What about additional properties?
The typical loan that we recommend for Nomad is conventional financing and they happen to be a bit longer wait after a bankruptcy. How long? 4 years after a Chapter 7 discharge to be able to qualify for a loan or 2 years after a Chapter 13 discharge. If your Chapter 13 was dismissed without a discharge, you’ll need to wait 4 years from the date of the dismissal.
Now… I’ve also heard, from time to time, of special bankruptcy friendly loan programs with higher interest rates. In the right situation, I’d probably be OK with these as well.