Buying a Home after Bankruptcy

Posted by Janis Penick on Monday, March 9th, 2020 at 12:16pm.

BankruptcyBankruptcy is a hard thing to recover from emotionally as well as the physical impacts a bankruptcy has on your life. Recovering from a bankruptcy can be challenging but with a little time and some corrective actions on your part, buying a home again isn’t impossible.

The good news is that you can buy a home after bankruptcy. It’s just going to take a little work on your part. In fact, you may be able to purchase a home sooner than you expected; depending on the actions you take and the type of bankruptcy you filed.

Here are the steps you should take after your bankruptcy to get back on the right track.

Check Your Credit Report

After your bankruptcy is discharged, it’s time to find out exactly where you stand in regards to your credit report. Order a credit report from each of the three major credit agencies; Experian, Transunion and Equifax. Make sure that all debts that were discharged show as discharged and all debts that were paid in full are represented as such. If you do find errors, however small, report them to the appropriate credit agency. The sooner you do this the better. Don’t let mistakes sit on your credit report.

Begin Building Your Credit Back Up

The easiest and fastest way to rebuild your credit after bankruptcy is through the use of secured credit cards and short-term, installment loans.

A secured credit card is like any other credit card with the exception that it requires a security deposit; normally an amount equal to your credit limit. You make monthly payments just like an unsecured credit card. After you have made several on time payments and proved that you can handle the card appropriately, ask the company to change your card to an unsecured card.

Short-term, installment loans are typically small personal loans or car loans. The creditors will report your on time payments to the credit bureaus each month and with each on time payment, your credit will begin to improve.

Prove Your Credit Worthiness

During the time you are beginning to rebuild your credit, make sure you don’t overuse your credit cards and make sure to pay your bills on time each month. Whatever debt wasn’t discharged in your bankruptcy, continue paying on that and pay it off as quickly as possible. If a at all possible, don’t change jobs during this time. When you apply for a mortgage, the lender will look for steady employment history and a good credit history. Having negatives on both will likely mean they don’t approve you for a mortgage at this time.

Keep It Up For Two Years

It seems like a long time, but the longer you wait after bankruptcy, the better your credit will be. A better credit rating normally equals a lower rate of interest and more favorable terms. A difference of a few tenths of a percentage point can save you thousands of dollars over the life of your loan so don’t rush things.

Save Up for Your Down Payment

When you have blemishes on your credit, a larger down payment can help lenders feel more comfortable with making a loan to you. This can be a great way to show you are making every effort to get back on track.

Don’t think bankruptcy is the end of the world because it isn’t. Take the necessary time and steps to rebuild your credit and you will be back on track before you know it.

The Janis Penick Team

RE/MAX Bastrop Area
Serving Bastrop, Cedar Creek and Smithville
janis@janispenick.com

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The Janis Penick Team is your ultimate real estate resource for Bastrop, Cedar Creek and Smithville, TX.

Image by Darko Djurin from Pixabay 

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