People often worry about declaring bankruptcy because they think that it will make future borrowing impossible. For example, maybe you’re facing medical debt and credit card debt that you would like to eliminate through bankruptcy. But you’ve also always dreamed of buying a home so that you don’t have to pay rent for years on end. You could be worried that declaring bankruptcy will make it impossible to get a mortgage.
There is good news. You definitely can get a mortgage after declaring bankruptcy, and you can buy your own home. Achieving this goal will take time and effort and there are some things you should know about the homebuying process post-bankruptcy, but it is possible.
What type of loan do you want?
One thing to consider is the type of loan you’re seeking. For instance, the waiting period is generally around three years after your bankruptcy is discharged to get a government-backed mortgage loan. If you’re seeking a loan that isn’t backed by the government, then you may need to wait for four years.
What type of bankruptcy are you filing?
Additionally, you’ll have to wait until the bankruptcy process is complete, which can take a different amount of time, depending on whether you opt to file for Chapter 7 or Chapter 13 protection. Chapter 7 discharges eligible debt within a matter of months. Chapter 13 requires a repayment plan that could take between 3 and 5 years to complete.
How can you repair your credit score?
Finally, you will need to work to repair your credit score in order to qualify for a mortgage loan. There are various ways that you can repair your score after bankruptcy. One common tactic is to get a secured credit card by providing the lender with a down payment that covers the balance of that card. Making your monthly payments on time, which is no risk to the lender, can cause your credit score to increase. This can make it so you eventually qualify for traditional credit cards, auto loans and home mortgages.
As you can see, the bankruptcy process can be complex, but it can get you to your end goal of homeownership. Make sure you know exactly what legal steps to take if you’re interested in bankruptcy, as the stakes of your case are high. Working with a legal professional can help you to achieve your debt relief and broader financial goals over time.
