If I file bankruptcy how will it affect me buying a home after?

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Question:

If I file bankruptcy how will it affect me buying a home after?

Answer:

Buying a home after filing bankruptcy is no easy feat. Mortgage lenders, like anyone else who is going to lend you money, is going to look at your credit report and score to determine if you are a bad credit risk or a good credit risk. Having a bankruptcy on your credit record is a major red flag to any creditor that signifies that you have gotten into trouble in the past and that you might not be able to pay them in the future.  As such, you are likely to be turned down by many mortgage lenders and you may also become the target of sub prime lenders who charge exorbitantly high interest rates. 

So, what are your options for buying a home after filing bankruptcy?

  • You should wait as long as you can. The bankruptcy will drop off your report in 10 years, but if you can't wait that long, you still should put off the purchase for as long as possible to help your credit improve
  • Considering an FHA lender is often a good idea. As long as it has been at least 2 years since your bankruptcy, FHA lenders may be more willing to overlook the black mark on your record than a standard conventional lender would be. 
  • You should also take steps to raise your credit before trying to buy a house. This usually means getting a secured card and being extremely responsible with it so you can build up a good credit history for a few years, which will then raise your credit score and make the mortgage lender more at ease

Bankruptcy is a serious decision with serious consequences. To fully understand what you are getting into when you declare bankruptcy, you should seek guidance from an experienced attorney.

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