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5 Tips for Buying a Home After Bankruptcy

Although bankruptcy is something of a dirty word in some circles, it has become a necessary reality for millions of Americans. The recession has gone on for years now, and the real estate market was one of the hardest hit. With people everywhere out of work for months or even years at a time and some dealing with massive credit debt or medical bills on top of trying to keep a family afloat, bankruptcy and foreclosure were often the only available solution. While it can be disheartening, it’s in no way a death sentence. In fact, you can even purchase another home after filing bankruptcy, if you follow the appropriate steps. Here are five tips for buying a home after bankruptcy.

The first step on the path back to home ownership is to re-establish a solid credit standing. This isn’t the easiest thing to accomplish, but it is absolutely possible. Start moving things in the right direction by getting yourself a secured credit card. Basically, this means laying out a cash deposit that ‘secures’ a line of credit. Many national banks offer this product, but if you’re finding even that difficult look to a department store to help you begin rebuilding. You’ll face steep interest rates, so just make sure that you consistently use and then pay off your card in full every month. If you can keep this going for a solid year, you’ll be well on your way towards buying a home.

Check in with the national credit agencies, and you’ll find that many of them will approve you for a mortgage a mere two years after filing your bankruptcy. That’s fantastic news, especially if you’ve resigned yourself to a long grueling path back to home ownership. But there are some baselines. As a rule of thumb you’ll need to get your credit score at or above 640. Depending on the type of bankruptcy you filed and how well you’ve been able to recreate a solid credit history this could take longer than two years. Just keep yourself focused on the right direction, and you’ll get there.

The other crucial aspect to buying a home after bankruptcy is making sure you don’t continue with any of your previous bad habits. You’ll basically have to maintain new lines of credit and then not miss a single payment. This is absolutely key. As long as you show a clean credit record with responsible behavior, two years after your mortgage, you’ll have a good chance of being approved by a lending institution.

Leading up to your attempt to lock in a new mortgage, make sure you are keeping a close eye on your credit score. Not everyone will be ready to go after a new mortgage this quickly, but remember that two year delay and window. Of course, you shouldn’t wait until two years have passed to check your credit. Request a copy of your score about six months after filing bankruptcy. You’ll need to make sure that the trade lines that should have been discharged in your bankruptcy actually were. If there are any outstanding collections, make sure they are removed from your record.

Finally, get the full copy of your credit report and check it over for inaccuracies. All of the old reports prior to your bankruptcy should have been expunged, but this isn’t always the case. And you’ll need to make absolutely certain that all of the new lines of credit you’ve set up are reporting accurately. Don’t wait a long time to do this work. Before you spend too much energy playing around with www.ratesupermarket.ca/mortgage/affordability-calculator/ and dreaming of your new home, you’ve got to make sure any issues are corrected. This can often take months to turn around, so handle any problems as far in advance of requesting a mortgage as you possibly can.

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