For some, the prospect of buying a house after bankruptcy can seem unlikely. However, it is possible to purchase a home for yourself and your family. It simply requires patience, planning, and the right help.
Here are some tips to get you started.
1. Build Credit
We’ve discussed some of the strategies to improve your credit, but to recap here are just a few things you can and should do to rebuild your credit after bankruptcy.
- Create a budget plan and stick to it
- Pay your bills on time
- Monitor your credit report and deal with any issues that arise
- Start saving for an emergency fund
- Build credit by taking out secured credit cards
2. Be Patient
Depending on the type of bankruptcy that you filed for, you may need to wait at least 24 months to apply for a mortgage after bankruptcy. You may be able to get a mortgage after bankruptcy sooner, but the terms, like interest rates, won’t be as attractive as they would be if you wait the full two years.
Since you might be paying that mortgage interest for up to 30 years, you will save money if you wait long enough after the discharge to get a good interest rate.
3. Be Ready
Taking the time will also allow you to save for a down payment, and get your finances in order.
When you apply for a mortgage after bankruptcy, the best thing that you can do is be prepared. Before you submit an application, ask yourself if you can demonstrate the following:
- Good debt-to-income ratio
- Stable employment and extended time on the job
- Money in savings
- Assets in a retirement plan or 401(k)
- Pay all your bills on time – Remember, payment history counts for 35% of your credit score
Also remember that the larger the down payment, the better the interest rate will be. That’s why it’s important to save as much as you can.
4. Be Honest
When considering buying a home, talk to your realtor, mortgage broker, or lender and be upfront about your financial situation. There are always options available, and the more information they have, the more they’ll be able to help you find a home.
Looking for more ways to improve your credit after bankruptcy? We invite you to take advantage of our credit analysis service. We can provide you with a detailed review of your credit report, a budget review, and a plan of action to improve your credit in a way that is effective and responsible.