Buying a home after chapter 13 bankruptcy is not necessarily going to be an easy task. Most people who buy houses don't have the cash to pay for the home in full. As such, you have to take out a mortgage loan. Mortgage loans are based on your income and your credit score and history, and with a bankruptcy on your record, your credit history probably won't make you look like a very good risk to the lender. Of course, this doesn't mean you can never buy a house. There are just a few things you need to consider when doing so.
Buying a Home After Bankruptcy
When buying a home after bankruptcy:
- Try to wait as long as you can after the filing and build your credit using secured cards. If you try to buy right after your filing, you may be uniformly denied by almost all lenders. However, if you take a little time to rebuild your credit score, you can improve your chances of getting a loan. The bankruptcy will drop off your report after 10 years, but even if you don't wait that long, you'll still be better off putting a little time between the bankruptcy and the loan application
- Consider working with an FHA lender. FHA loans are backed or guaranteed by the government, so they are less risky for a lender. You can usually qualify for an FHA loan even if your credit isn't good enough for a conventional loan, and the interest rates will usually be lower than for sub prime loans. Typically, as long as your bankruptcy is at least 2 years old and you haven't had any problems with your credit since then, you'll be considered a good candidate for an FHA mortgage
- Try to save up as large of a down payment as possible. The larger the down payment, the more equity in your house and the less risky you will seem to your lender.
An experienced bankruptcy lawyer can help you to understand exactly what impact bankruptcy is likely to have on your credit and on your ability to get a mortgage or make other financial transactions after the bankruptcy filing. it is a good idea to consult with a lawyer throughout the entire process of your bankruptcy, both to get help with the actual process of filing and also to deal with some of the financial issues that bankruptcy may create for you after your case is done.