Mortgage After Bankruptcy. It is still possible to purchase a house after filing for bankruptcy. It can be challenging and you will have to wait some time before your finances are able to bounce back but it is doable.
The most common guideline you’ll have to follow to purchase a home after bankruptcy is to go through a waiting period. Most lenders and mortgage lending programs including FHA and VA usually require this.
The average waiting period is two years. Check with your state and lender to find out what applies your particular circumstances. If your bankruptcy is due to hardship outside of your control, such as job loss or extenuating circumstances, you may be able to reduce that time to one year.
Rebuild Your Credit Quickly To Get Even Faster Approval
Open a credit account or using an existing account, make payments on-time for at least 12 months. Do not close the accounts after paid off. Rather, keep them open and active. Always keep the ratio of what you spend to what’s actually available low. For example, on a $1000 credit card, have an open balance of no more than $300.
Open a secured credit card. Again, make monthly on-time payments to show a good payment history. You can use this card for minor expenses, such as gas, groceries or utility bills.
Show that you know how to handle other types of credit accounts. Whether student loans, personal loans or other types of credit (what is closed end credit?), make regular on-time monthly payments so that you begin to develop a track record of success.
Talk to your lender about the requirements necessary to qualify for a mortgage loan. This includes minimum credit score, debt-to-income ratio, length of waiting period after bankruptcy discharge, if you have extenuating circumstances and if there is anything you can do to reasonably speed up the process.
Even More Tips To Help You Buy Your Home After Bankruptcy
Look for first-time homebuyer programs. If you’ve never purchased a home, look for first-time homebuyer programs. Check out the eligibility guidelines and see if there’s some flexibility for your situation, particularly if you’ve been able to find new employment after a job loss.
Bring more to the table. An FHA loan will normally allow you to purchase with as little as 3.5% down payment. Are you able to put down 5% comfortably? If so, this can only help you.
Look at the various lending programs within your bank to see which will be most attractive to your situation. It doesn’t hurt to ask and to begin preparation as soon as you know you want to buy a home. With planning, proper documentation and persistence, you can bounce back from bankruptcy and buy your new home.
Learn more about the differences between chapter 7 vs chapter 13 and how to avoid bankruptcy as well as what is fair market value.