Home Ownership – Buying a Home After Bankruptcy
One concern clients have when considering filing for bankruptcy protection is whether they will ever be able to obtain credit in the future. Buying a home after bankruptcy is a goal of most clients; however, a lot of patience may be needed. Bankruptcy can help put you in a position to get the assets you desire in a relatively short period of time.
The first step is filing bankruptcy.
Once your case is filed your credit score will take a hit and the bankruptcy filing will be notated on your credit report for 10 years. If you’re considering filing bankruptcy your credit score may already be low, which will hinder your ability to purchase a home. While your case is open you will receive credit card and car loan offers in the mail. BE PATIENT! While your bankruptcy case is open you should stay focused on receiving your discharge order from the bankruptcy court; not receiving a new credit card. Once your discharge order is granted (the order wiping away your debt) you are one step closer to buying a home after bankruptcy.
After your bankruptcy case is discharged look into getting a secured credit card or an installment loan. The secured credit card reports your payment history to the credit bureaus just like an ordinary unsecured card. The installment loan (personal loan, car loan, etc.) will also help rebuild your credit and establish a payment history with your credit report. Since you recently received a bankruptcy discharge you won’t have other debt that you are responsible to pay back. Focus on building your credit at this time as these small steps will go a long when when buying a home after bankruptcy.
Your patience will pay off!
On average, reports state that you should wait 24 months after receiving your bankruptcy discharge before considering purchasing a home after bankruptcy. I have been asked if it takes 10 years before you are eligible for a mortgage. No! All it takes is patience and discipline and you can realize the American Dream in no time. You might be able to purchase a home sooner but the interest rates and terms of the mortgage might not be as attractive. Other factors that will affect your ability to obtain a mortgage will be the lender and their particular requirements, the type of loan you apply for, the down payment you can make, and your recent credit history just to name a few. However, with your old debt discharged and your financial future ahead of you, this is a great time to purchase a home as long as you approach this opportunity responsibly.