If you have filed for bankruptcy in the past, and want to know if you can still purchase a home, the answer in short is: generally yes. The bigger question is how long after the bankruptcy do you have to wait before you apply for a new financing?
Most new mortgage loans will require a minimum waiting period of two years after the bankruptcy discharge date. You will also have to show financial responsibility after the bankruptcy discharge.
As with all mortgage loans, you will need to be able to prove a good employment history and that you have made all of your payments on time after the bankruptcy. You will need to have an acceptable debt to income ratio as well.
While the mark on your credit for Chapter 7 bankruptcy will last for 10 years and a Chapter 13 bankruptcy will last for 7 years, it will help if you immediately start rebuilding your credit after discharge.
Most people do not try to get credit after a bankruptcy, but that move can seriously hurt you. You need to re-establish credit and prove your credit worthiness.
Some good advice would be to open a secured credit card with a smaller limit and keep the balance at around 25%-30% while making consistent, on time monthly payments. If you do this right away after the discharge, your credit will start building again right away. You may want to speak to a credit counselor or mortgage lender to see what else you can do to show you will be less of a risk for a home loan approval.
It is common to see your credit report, even years after your bankruptcy still showing items that were included in the bankruptcy reporting like you still owe them. Be sure to get a free copy of your credit report at www.annualcreditreport.com. Review it for accuracy, and dispute anything not reporting correctly.
Different loan programs have different minimum waiting periods. Currently the waiting periods are as follows:
NOTE: Extenuating circumstance exceptions are very difficult to obtain. Non-recurring events that are beyond the borrower’s control that result in sudden, significant, or prolonged reduction in income. Unemployment, strikes, divorce, medical bills not covered by insurance are examples of items that are NOT considered extenuating circumstances.
There is hope to getting a home loan after bankruptcy. If you make the right choices and keep a sound financial strategy, taking part in homeownership is a dream that can be realized, even after bankruptcy.
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