Determine if you can wait. Waiting a couple of years after your bankruptcy will give you enough time to rebuild your credit report to a point where you can qualify for 100-percent financing and average interest rates. Most lenders will require you to wait this long for typical mortgages.
The key to getting a home mortgage after bankruptcy is to immediately start rebuilding your credit. Depending on when you apply, you may have to pay a higher interest rate than borrowers without a bankruptcy on their credit report. You can, however, always refinance later when your credit rating improves. Here are tips.
Decide how much you can spend. You can get pre-approved for up to 28 percent of your pre-tax income by many lenders online, but you have to determine if you can consistently afford to pay that amount on your own. Take an honest look at your finances and spending habits, and don't apply for more than you can afford (or you could end up back in bankruptcy court).
Gather documents for income verification. How much money you make on a consistent basis becomes very important when applying for a mortgage after a bankruptcy.
Expect to have to pay slightly higher interest rates and make a down payment if you apply for a mortgage within 2 years of your bankruptcy. You may not have to pay more than a 5-percent down payment, but it would be difficult to get 100-percent financing so soon after a bankruptcy.
Gather funds for a down payment. If you aren't planning on selling a home to help pay for the down payment, look to down-payment assistance programs and family members for help with your down payment.
Shop for lenders online. Using sites that allow you to compare different lender programs and rates in one glance can save you time and paperwork applying for multiple loans.
Tips & Warnings
- Tell your lender if you are borrowing money for your down payment and how you plan on paying it back. Most lenders want to know this information and will not take kindly to being misled.
- Have a plan to repay friends or relatives who loan you money for a down payment. You can probably get a second mortgage on your home to pay them back after you close on the first one.
- Don't expect to be able to buy a home if you filed for Chapter 13. Odds are that your trustee will not allow you to purchase a new home until you have satisfactorily paid back your creditors according to your repayment plan. If you already have a home that you can sell and plan to use the equity for a down payment and to pay off creditors, an exception might be made.
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