Buying a Home after Bankruptcy

bankruptcyWhen you file either Chapter 7 or Chapter 13 bankruptcy, you are not only devastated, but you may believe that your dreams of purchasing a home are over.  When you enter into bankruptcy, your ability to obtain a loan or get a credit card is drastically impacted because of the effect that the bankruptcy had on your credit score, states Dean Graziosi.  It will take some time to rebuild your credit and get it to a point where you can apply for new credit, but it is not impossible.  If you properly prepared and carefully planned your finances you may be able to purchase a home sooner than you imagined.

The first thing that you should be aware of when filing bankruptcy is that it must be discharged before you even consider contacting a lender.  Once your bankruptcy has been properly discharged, your first step should be to carefully examine your credit report.  If you notice that there are any debts that you have paid still listed, you need to contact the credit reporting agency and have them removed.  Each year you can request a copy of your credit reports from the three major reporting agencies, take advantage of that and dispute any errors you may notice.

The next thing you should do is begin rebuilding your credit.  The fastest way to do this is to demonstrate to creditors and other lenders that you can successfully pay back any money you owe them.  The two most effective ways to do this is to obtain a secured credit card or an installment loan.  When you obtain a secured credit card, you are limited to the amount that you have on deposit with the issuing bank.  An installment loan is a loan that you obtain where you are required to repay either a personal loan, student loan, or car loan through installment payments each month.  When you obtain an installment loan, your only worry is that you can make these payments on time each month.

You should be prepared to wait at least two years after your bankruptcy has been discharged before you apply for a mortgage.  You may be able to qualify for a mortgage sooner, but know that the interest rates and terms may not be as appealing compared to those you can get if you wait.  To ensure that you receive the best possible rates and terms, Dean Graziosi recommends waiting a minimum of two years.

After you have waited two years, you should ensure that you are fully prepared to apply for a mortgage.  You will likely have to meet certain criteria from your lender before they agree to approve your loan.  Your debt-to-income ratio will be scrutinized; your time and stability at your current job and a current savings and checking account will also be looked at carefully.  Purchasing a home after bankruptcy is not impossible; it may just require some additional work on your part.

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