HOW BANKRUPTCY AFFECTS YOUR HOMEBUYING OPTIONS

The deals to be had in the housing market today have everyone considering purchasing a new home. Some buyers may afraid that a past bankruptcy may hinder their home buying dreams, which is not necessarily the case. Having filed for bankruptcy does not mean you are automatically disqualified from purchasing a home. Bankruptcy does not mean you cannot take advantage of the bargains available, it just means that it may be a bit more difficult for you than it is for those who have perfect credit.

In some cases people who have filed for bankruptcy are often encouraged to find ways in which they may build their credit score by taking on debt. There are some downfalls to rebuilding your credit in this manner, the credit you are awarded will be in smaller, more manageable amounts and will come with a higher interest rate. Having a bankruptcy on your record makes you a high risk borrower and until you are able to re-establish your credit rating you will be forced to deal with a higher interest rate than other borrowers.

There are some things that you can do without opening new charge accounts to repair your credit. It is important that you pay your bills on time; this will prove to prospective lenders that despite your past you are working hard to build up your credit rating. Another thing to do is, inspect your credit report for any errors. If any errors are found you are allowed to appeal them to the reporting agency and have them removed. It is also suggested that you obtain a secured or unsecured credit card and use it only when necessary. The credit card company will report to the credit bureaus that you are repaying your card on time and have no record of late payments.

When you feel that you are ready to start looking for a home loan there are some things to keep in mind before contacting prospective lenders. Many mortgage companies look for buyers who have improved their credit rating and are on the road to establishing responsible money habits. When lenders look at your credit report they are looking for three things from prospective borrowers who have filed for bankruptcy:

· A two-year period of on time payments

· Proof that you are capable of raising a down payment

· A steady income

The most important of the three is proof of a steady income. The other two requirements can vary from lender to lender. Some lenders may feel that you have proven yourself reliable sooner than the two years. With a steady work history and a down payment it is not impossible for someone just coming out of bankruptcy to acquire a home loan.

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