How Soon After Filing Bankruptcy Can I Buy a House?
No rules exist to govern the length of time an individual must wait to buy a house after bankruptcy. Rather, lenders make this decision based on the credit risk of the borrower. Filing bankruptcy does give people a fresh financial start, but it requires the rebuilding of credit before lenders will consider lending again. It may be possible to find lenders willing to do so within a few years of filing bankruptcy.
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Consequences
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Filing bankruptcy results in long-lasting negative effects on a credit report. A notification that the individual filed bankruptcy remains on a credit report for up to 10 years. This can make the process of purchasing a home difficult because lenders may be less likely to loan to an individual with a lower credit score.
Building Credit
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After filing bankruptcy, work to build credit. Obtain secured credit cards that report to the credit bureaus each month. Use them sparingly and pay them off on time. Keep all debts low and stay up to date on any current mortgage you have. Avoid taking on too much debt. Demonstrate the ability to manage finances over the six months to two years after filing bankruptcy.
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FHA Loans
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FHA loans help those with less than ideal credit scores to qualify to buy a house. This type of loan is available through most mortgage lenders. The Federal Housing Authority, which is part of the US Department of Housing and Urban Development, will consider applications from those who have filed bankruptcy after two years. FHA loans often have lower interest rates than loans available through other lenders in this initial timeframe after filing bankruptcy.
Down Payment
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To improve the ability to obtain a loan, have a sizable down payment to put toward the purchase of a home. Home buyers who make a down payment are less likely to walk away from home loans and therefore are a lower risk to lenders. A down payment of at least 20 percent of the purchase price is often recommended.
Maintain Employment
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Hold a job and make enough income to pay for a mortgage payment. To buy a house after filing bankruptcy, individuals need to show lenders they have the financial means to repay the loan. Increase the amount of discretionary income available. This is the amount of money available to spend after all utilities, loans and other payments each month.
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References
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