You’ve filed for bankruptcy. Will you ever be able to buy a home? The short answer is yes. The longer answer is that it will most likely be a few years between the discharge date and the date you’re able to qualify for a mortgage with a relatively low interest rate. To make yourself a more attractive borrower post-bankruptcy, there are a few things you can do.
Review Your Credit History
Your credit most likely took a hit after you went bankrupt. The information stays on your credit report for up to 10 years (if you filed for Chapter 7) and for seven years if you filed for Chapter 13. After that time, it should disappear from your report, without you having to do anything.
In the meantime, though, it’s worth it to review your credit report and to make sure there isn’t any inaccurate or outdated information on it that would negatively affect you. If you do find errors on your reports, you can report them to the credit agencies for removal.
Commit to Rebuilding Credit
After your bankruptcy has been discharged, the best thing you can do is to commit to rebuilding your credit to raise your score and make you a more attractive borrower to lenders. You might consider getting a secured credit card to start the rebuilding process. With a secured card, you put a small deposit down as insurance that you’ll repay the balance. Learning to budget and sticking with your budget will also help you get your spending on track.
No one is able to buy a new home immediately after a bankruptcy discharge. Generally, a waiting period of at least two years is requirement before you are eligible for a mortgage again, as Nolo notes. Usually, the two year period is for people who plan on applying for a Federal Housing Administration (FHA) loan and who have filed for Chapter 7. If you’ve filed for Chapter 13, you might be eligible for an FHA mortgage again after 12 months of making regular, on time payments as part of your plan.
Keep in mind that you might have to wait longer than two years if you are going to apply for a conventional mortgage. Depending on the cause of the bankruptcy, you might need to wait four years before you qualify for a conventional loan again. Usually, the waiting period for conventional mortgages is two years if the bankruptcy was because of an issue you had no control over (such as a divorce or medical issue). If it was a result of poor financial decisions, you’ll usually have to wait the full four years.
When you are ready to purchase a home again, speak with a mortgage specialist to learn more about your options (i.e. an FHA loan or conventional mortgage). They’ll be able to direct you to credit repair and counseling companies to help you get your financial life back on track.