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Step 1
Correct your credit record. Just because you had debts discharged in bankruptcy, doesn't mean your credit report will automatically reflect these changes. It's not uncommon for debts effectively wiped out in bankruptcy to still appear on a credit report until the reporting agency is contacted and corrected. Lingering debts on your credit record will continue to hurt your credit score.
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Step 2
Build credit. Right after bankruptcy, all you'll be eligible for is a secured credit card, meaning its directly linked a bank account and has a low limit. Look for a card with a low or no fees and don't be afraid to use the card as long as you can pay your balance in full each month. Getting credit and remaining in good standing by paying all your bills on time will help boost your score to where you can start to be eligible again for a home loan.
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Step 3
Maintain a steady and significant income. The single most important factor a lender considers is your income. Lenders expect you to use no more than 30 percent of your monthly income for your mortgage payments, so if you're working on a Chapter 13 repayment plan you might not qualify until the plan is complete, usually three to five years. But, holding a job for at least two years looks good to a lender.
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Step 4
Save money. When it comes time to start looking for a house to buy, you will need to have a down payment. Ideally, a lender will look for 20 percent of the purchase price, but this can be negotiable. While paying your bills on time, be sure to be able fit adequate savings into your budget so when a home-buying opportunity arises, you're able to jump on it.
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Step 5
Switch to unsecured credit. The first major step toward normal credit out of bankruptcy is the switch from secured credit to unsecured credit. If you've been staying current on your balance, this can happen after about 18 months for Chapter 7 bankruptcy. For Chapter 13, it's not likely until your payment plan is finished. You'll get offers in the mail letting you know when credit card companies think you're ready.
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Step 6
Shop around. Six months after getting unsecured credit and remaining in good standing (as soon as two years after Chapter 7), it's time to start shopping around. Supposing you have steady income and savings, it's quite conceivable you will be approved for reasonable mortgages, though you might be quoted an interest rate 2 to 3 percentage points higher than you might have gotten without the bankruptcy.
