If you have recently dealt with a bankruptcy, the thought of purchasing a home for the first time may seem impossible. Fortunately, if you have gone through bankruptcy, you can buy a home eventually as long as you abide by all the rules of the bankruptcy you filed. The following are some things you should consider before you attempt to buy a home after a bankruptcy:
What Do You Need to Do to Increase Your Likelihood of Home Ownership?
After you file for bankruptcy, you will not immediately be able to get a mortgage. You will have to spend a few years rebuilding your credit to show banks you have what it takes to buy a home and make your monthly payments. It may also be difficult to get different forms of credit right away.
As soon as you qualify, open a secured line of credit. Look for a company who will report your information to all credit bureaus so your score will increase as you use the account. Every time you use the card and make your payments on time, your credit score will gradually increase and improve your odds of getting a mortgage.
If you have other payments you did not discharge in bankruptcy, you should continue to make those payments on time each month to not downgrade your credit. This includes student loans and car loans you reaffirmed in the bankruptcy.
After a few months of making regular payments, check your credit report to see where you stand. Look over the report for any upswings in your status. Also, check the report for anything that does not seem right. If you discharged debt in your bankruptcy, those accounts should show they are closed. Be sure to correct any mistakes you see with the credit bureaus. The faster you clean up your credit report, the quicker you will be able to buy a home for the first time.
What Should You Do to Prepare for Home Ownership?
As you begin to buy a home, you need to save up a down payment as soon as you can begin putting money away after your bankruptcy. Your interest rate will likely be higher than those with better credit, so keep that in mind. If you do not want to pay higher interest rates, you can wait a few more years so your credit can continue to improve. You could also get a loan now and refinance it later for a lower interest rate once your credit score is better.
You need to keep copies of your bankruptcy documentation. Your mortgage loan officer will want to review it in addition to your other mortgage loan information before approving your loan.
It is best to get pre-approved for a mortgage before you begin house hunting. This helps expedite the buying process once you find the home you want. You will also know exactly how much money you have to work with. That way, you will not get your heart set on a home you cannot afford.
Share16 November 2018
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