How to Get a Home Equity Loan After Bankruptcy

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How to Get a Home Equity Loan After Bankruptcy. A home equity loan is a loan based on the equity (home's value minus mortgage) in your home. Once you have filed bankruptcy, it will be more difficult to get loans, though not impossible. Home equity loans are easier to get because they are secured by the value of the home, meaning the lender can foreclose on your home if you fail to pay.

Find out where your credit stands now. Before applying for a home equity loan, get a copy of your credit report and be sure that all debts included in the bankruptcy are displaying this, which will lower your debt to income ratio. Remove any problems, discrepancies and errors from your report by filing a claim with the credit bureaus.

Work to establish new credit through secured credit cards, credit cards with higher fees or those offered to you. Be sure these lenders will report to the credit agencies and use the credit cards sparingly. This builds your credit score and shows you can effectively manage money after your bankruptcy.

Determine the amount of equity in your home through an appraisal, which is a professional estimate of the value of your home. This shows you how much you can borrow. Factor in several thousand dollars worth of closing costs, as these often come with a home equity loan.

Look for home equity lenders that specialize in those with bad credit. While your interest rate may be more than other borrower's rates because you have bad credit, it will still be much lower than credit cards. Making monthly payments on your home equity loan each month also will help you to rebuild your credit.

Get quotes from several home equity loan lenders and be upfront with them about your past bankruptcy. Most will lend home equity loans to borrowers with bankruptcies of at least 18 months to two years past. They will offer you specialized help and many of these lenders can be found right online.

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