Declaring bankruptcy is not the end of your dreams of owning a home. Having a bankruptcy on your credit report doesn’t mean that you can’t buy a home. Individuals and couples who have gone through bankruptcy are highly encouraged to rebuild their credit post-bankruptcy by obtaining loans and taking on debt.
Debt will be closely scrutinized post-bankruptcy. It will come in smaller amounts with lower limits. It will come with higher interest rates because bankruptcy labels you (to lenders) as a higher-risk borrower. But just because there are downsides to the effect of bankruptcy on your credit doesn’t mean that individuals who have filed should be discouraged from looking into their home purchasing options. Bankruptcy filers actually need to responsibly access and use credit in order to make it back to stable financial footing after filing.
Many aren’t sure how to approach responsibly using credit in order to rebuild their credit after bankruptcy. It seems a contradiction. Since establishing good credit post-bankruptcy is absolutely essential to financial health, it’s necessary for filers to actually consider it a step-by-step process.
- Pay bills on time. The best (and most important) thing you can do for yourself post-bankruptcy in order to rebuild your credit and financial strength.
- Obtain and use a reputable secured or unsecured credit card. Never charge more than you can afford to pay off each month.
- Regularly access and read your credit report. It’s possible for reporting agencies to make mistakes and watching your report can be a great way to keep yourself focused on improving your score.
Taking the steps to rebuild your credit is even easier when you have an admirable goal. For many that goal is to obtain a loan to purchase a home. Here are a few basics regarding getting your hands on the funds you need to buy a home post-bankruptcy.
The first question most have regarding obtaining a home loan post-bankruptcy is when? How soon should you attempt to obtain a home loan after filing? It’s not surprising that lenders want to see indications that borrowers with recent bankruptcies are now on a healthier, safer and more responsible financial track. This can most effectively be shown by a two-year (or more) stretch of on time bill payments. In addition to a positive payment history, you’ll need to have steady employment/income and an appropriate down payment. While the length of on time payment history may be negotiable with certain lenders if there’s a positive payment history on a vehicle or credit card, there is no way around the requirement of a steady income.
With steady work and a down payment it’s possible for someone to secure a home loan pretty quickly after declaring bankruptcy. Although finding a reputable lender willing to take a risk immediately following bankruptcy would be extremely difficult for obvious reasons. It’s a much better idea to approach post-bankruptcy borrowing slowly. Show you can responsibly borrow by paying bills on time and you’ll find home ownership isn’t too far away in your future.
To discuss the details of recovering post-bankruptcy, contact the experts at Westgate Law today.