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Going bankrupt does not necessarily ruin your chances of owning a home. Many lenders are now offering home mortgages after bankruptcy, and you can easily shop around for one that offers you the most flexible payment terms and reasonable interest rates.
What does it take to secure a mortgage after bankruptcy?
Your chances of getting banks and other lenders to let you borrow money for a home is better is you filed for a Chapter 13 bankruptcy – the ‘loan restructuring’ bankruptcy. In this kind of bankruptcy, you are still paying for your debt in more reasonable increments, allowing banks to review your credit performance.
Lenders generally consider people who have filed Chapter 13 bankruptcy more ‘desirable’ mortgage after bankruptcy candidates because these homebuyers are willing and able to pay back their loans even under difficult circumstances.
I filed for a Chapter 7 bankruptcy. Is there hope for a mortgage loan?
It may be harder, but it certainly is not impossible. If you have filed for a Chapter 7 bankruptcy – the ‘liquidation’ bankruptcy that absolves you from paying your debt – you might have a more difficult time securing mortgage after bankruptcy. This is because banks and other lenders now perceive you as someone who is incapable of paying any kind of debt. Give it some time. Religiously and punctually pay your bills, and you will win back the trust of banks and lenders in no time, and get them to grant you a mortgage after bankruptcy.
Another way to show that you have overcome your financial problems is to supply proof that you have paid your rent on time each month for two years. If you can, it will be helpful to save a large amount for a down payment on the house you wish to purchase (such as 20%). This will show mortgage lenders that you are now ready for a mortgage after bankruptcy.
How is a mortgage after bankruptcy different from regular mortgage loans?
Expect interest rates that are a little higher than normal when taking advantage of a mortgage after bankruptcy. You will probably not be eligible for the lowest mortgage interest rates.
Securing a home mortgage after bankruptcy also takes longer than the regular home mortgage loan, because banks and lenders need to more carefully examine your credit record. It is best to wait about two years before you apply for a mortgage after bankruptcy, to give banks and lenders an ample period from which to review your financial behavior and performance.
How will I know if I am eligible for a home mortgage after bankruptcy?
To get an idea of whether or not you have a good chance of landing a mortgage after bankruptcy, get your credit report. Some lending companies even offer this for free, so it should not be hard to secure this information. Understanding your own credit report will give you a clear picture of how you fare in terms of credit standing, and make your expectations more realistic.
Credit reports list your history of accounts and provide information on each account, such as when you opened it, what your current balance is, what your highest balance was, and when you made each past due payment. Credit reports also contain information on when you closed an account, and sometimes, the reason why you did. Your bankruptcy record is also there, together with other public records such as repossessions and foreclosures, if you have any.
Banks use credit reports to generate your credit score (FICO score). Scores start from as low as 350 to as high as 850. The higher your score, the better your chances of securing a home mortgage after bankruptcy. | 
