How to Get a Home Equity Loan With a 1 Year Old Bankruptcy on File

It is possible to get a home equity loan a year after bankruptcy.

Bankruptcy can be a great help for people needing to dig themselves out of bad debt, but getting credit after bankruptcy can be difficult. Even after a year of bankruptcy, getting a home equity line of credit will be near impossible, but you can increase your chances if you begin working the second your bankruptcy is discharged and you have a sizeable amount of equity in your home. If you follow those steps, then you may be able to secure a home equity loan.

Instructions

1. Keep your mortgage off of the bankruptcy. The mortgage cannot be on the bankruptcy as that would eliminate the debt, but still leave the lien on the home. You must keep the mortgage exempt from the bankruptcy and be on time with the payments. As soon as the bankruptcy is discharged, begin repairing your credit so when you decide to get the home equity loan a year later you credit will be spotless.

2. Find out about the equity in your home. If you are planning to get a home equity loan so soon after bankruptcy, then you are going to need a substantial amount of equity. If you are going to qualify for any home equity loan, you are going to need about 50 percent equity at the minimum. The bank must know that if it needs to foreclose, then it will get its money back after paying off the initial mortgage.

3. Get you house appraised. A new appraisal will give you the most current value of your home in the market place. If you haven't had it appraised in a few decades, then the increase in equity could be substantial. When it comes to getting the loan, every little bit helps.

4. Search for lenders. Banks generally want to see two years of good credit before they consider providing a home equity loan. There are other lenders that specialize in bad credit home loans and may be able to work with you to get the loan. The interest may be higher than a standard bank loan, but at least you will qualify.

5. Create your budget. If you end up qualifying for the home equity loan, then set up your budget with the monthly payment right away. You should have spotless credit since the bankruptcy, so don't become lax once you get the loan. Always remember that if you default, then they can foreclose on the house even if the primary mortgage is up-to-date.

References

• MSN Money: Bounce Back After Bankruptcy
• Smary Money: Bankruptcy Cab Actually Increase Your Credit Score
• Nolo: Home Equity Loan Basics