Buying a Home after Bankruptcy

Because of the debt crisis in the United States and all over the world, more and more individuals have filed bankruptcy in the last few decades than ever before.  If those individuals desire to purchase a home after filing bankruptcy, it can be quite difficult – and it is easy for them to believe that it’s impossible.  Below, you will find some important information regarding buying a home after bankruptcy.

Larger Interest Rates and Down Payments

While individuals with bad credit and bankruptcies on their credit can still purchase a home, they are most likely going to pay more than individuals who have never filed for  bankruptcy or who have great credit in order to get a mortgage.  Most typical lenders will require a 20% to 30% down payment on a home for those who have filed bankruptcy.  Lenders like FHA may require a down payment of about 3%.  Some sub-prime lenders will not require a down payment after a reasonable amount of time has expired – but your FICO must be around 580 or 600.

Typically, any type of lender will require a waiting period after the bankruptcy before any financing takes place at all.  Depending upon the lender, it could be a period of 6 months or a few years.  While this seems very discouraging, there are some different things individuals can do to rebuild their credit which will help with buying a home after bankruptcy.

Credit Cards and How They Can Help

While it’s not advisable to obtain several credit cards and purchase things with those cards, having one or two can help rebuild an individual’s credit.  Since credit card companies understand that you’ve filed for bankruptcy, that you have no debt and that you’re unable to file bankruptcy for at least seven years – they may be willing to provide you with a credit card.

The key is to be smart when it comes to rebuilding your credit.  Purchase things with the credit card that you have the money to pay for already – then pay the credit card off IN FULL at the end of each month when the statement comes in.  Some of the things you might choose to pay with your credit card include:

• Utility bills
• Gasoline expenses
• Telephone or cell phone bills
• Cable or satellite bills

It’s easier to pay these with a credit card rather than purchasing actual items because you may be tempted to purchase things you don’t need.  By using this method, you can build your credit and make buying a house after bankruptcy easier.

Saving Money

It’s quite important that individuals save money if they are planning on buying a house after bankruptcy.  Since lenders will usually require some type of down payment, it’s important to create a financial plan.  If an individual factors in the typical cost of a home in their area and then determines what 30% to 30% of that amount is – they will have a goal for savings.  The chances of getting a home after bankruptcy are much higher if an individual has a down payment ready.

Although it may be more difficult to purchase a home after someone has filed for bankruptcy, it is not impossible.  The above information shows what is needed and which plans should be followed to be able to purchase a home – even if you have already filed  bankruptcy.