How to Get a House Built After Filing Bankruptcy

Building a new home takes decent credit.

Building a home is a part of the American dream, but when you are faced with a blemished credit history, you may wonder if that dream can still come true. Many people with past bankruptcy issues have gone on to become homeowners, and you can too. Learning what you need to do to accomplish this dream can help get you on the path to home ownership.

Instructions

1. Request your credit report and score from all three credit reporting agencies Equifax, Experian and Transunion. You want to see if your report and score is still impacted by the filing of the bankruptcy. According to MyFico, “a bankruptcy is going to be factored into your FICO score until it falls off your credit report. While it may take up to 10 years for a bankruptcy to fall off your report, the impact of the bankruptcy will lessen over time.”

2. 

   Using a secure credit card to rebuild a tarnished credit score.

   Reestablish your credit by applying for secure credit cards. As stated on MyFico, “after a bankruptcy has been filed, the sooner you begin retaining or reestablishing credit in good standing, the sooner you can expect your FICO score to rebound. A good practice is to obtain a secured credit card and continually make all of your payments on time.” Your goal is to work on increasing you credit score. Obtaining a score in the high 600’s will help you to acquire a better interest rate on your loan.

3. Schedule an appointment to meet with a loan officer. You can get prequalified for your home loan. You will find out how much money you qualify for at this particular time. The prequalification status is based on your credit report and other personal information the loan officer obtains from you, such as your job status and salary. The officer will explain your chances of getting approved for more money if you need it. This person can also give you some advice on ways to get a good interest rate on your loan.

4. Apply for a mortgage loan. Once you are discharged from the bankruptcy, you have the opportunity of applying for a conventional or FHA loan. Your chances of acquiring a FHA loan may be greater than a conventional loan. FHA loans are insured by the federal government, so the lender will be covered if the borrower defaults on the loan. FHA loans are also more flexible about how you acquire a down payment.

Resources

• Credit Q&A: How Can I Minimize the Negative Effect of a Bankruptcy?