Can you purchase a home after a bankruptcy filing?
Yes, sometimes it is even possible during a Chapter 13 case.
How quickly you are able to purchase a home and qualify for a loan is up to the discretion of the lender and the work you put into building your credit.
Is buying a home after bankruptcy possible?
We are often asked by clients if they will ever be able to buy a home if they file for bankruptcy. Bankruptcy offers consumers a fresh start, meaning most consumers will walk away from all their unsecured debt like credit cards, medical debt, car repossessions, foreclosures, and collection judgments. The cost of this fresh start is that you will need to rebuild your credit history to qualify for loans after filing bankruptcy.
Take the appropriate steps:
Consumers applying for a mortgage after bankruptcy will have to meet the same requirements as consumers applying that have not filed for bankruptcy. After your bankruptcy case closes, begin building up a savings account for emergencies, larger purchases, and for a down payment on your future home. Mortgage lenders are looking for applicants that are able to maintain a stable employment history. Contributing on a regular basis to your retirement account will also allow lenders to see you as a reliable investment.
It is crucial after your bankruptcy to maintain a perfect credit history. It is essential you make your car loan payments and student loan payments on time. Do not write any checks that cannot be covered by your bank account. You may consider opening a secured credit card to begin rebuilding your credit history. Unlike a regular, unsecured credit card, a secured card requires you to put a deposit on the card and you are only able to spend up to that deposit amount. So if your deposit is $300.00, you can charge up to $300.00 on the card. Sometimes cards may allow you to increase your deposit over time or may increase your spending limit without requiring any additional deposit. Be careful that you never spend more than you can pay off in one month.
What Mortgage lenders are looking at:
Mortgage lenders will access your ability to qualify for a mortgage on your debt to income ratio. If you allow your credit card debt to carry over month to month, then you will likely find yourself in a position where you will be unable to qualify for a mortgage due to your debt to income ratio.
Take the time after your bankruptcy to rebuild your credit history, establish a savings account, and keep debt balances low. Bankruptcy may give you the fresh start you need to get back on track and into a home sooner than you thought possible.