Many people in dire fiscal trouble may be unwilling to declare themselves bankrupt, based on the perception that it will be nearly impossible to buy a house after filing for bankruptcy.
It may be tougher to find a lender ready to take a chance on you, and the interest rates may be higher. But, it usually isn’t unattainable to buy a home after bankruptcy.
After you have filed for individual bankruptcy (whether Chapter 7 or 13) here are a few steps you will have to take if you hope to buy a new home. Fully grasp that after a bankruptcy your credit score will take a decent hit, even though if you had the need to file, it was most likely already pretty low.
Remember too, that credit reporting agencies will certainly report your individual bankruptcy and keep it in your credit file for 10 years. From a loan company’s point of view, your history suggests that you are a bad credit risk and approving a loan big enough to buy a home would not seem to be in their best interest.
So, begin by cleaning up your credit report. Following the discharge of your personal bankruptcy, obtain a copy of your credit history and make certain that anything on it that really should not be there is taken off.
You need to contact all three credit reporting agencies to make this come about. The Fair Credit Reporting Act offers specific rules so that you can maintain a precise report.
You can choose to rebuild your credit by trying to apply for a charge card and paying it on time, monthly. Yes, the interest rates will likely be higher than you could be used to, but the benefit can be a higher credit history.
You can even make an effort to obtain installment loans through various agencies, and even more importantly, if you’re able to acquire this sort of credit, ensure every payment is made promptly.
It can be a little frustrating to try to get your credit report cleared up, but you’ll have to show lenders it’s simple to make payments by the due date and you deserve a home loan.
It will take up to two or perhaps 3 years to build up your credit score before lenders are going to be willing to give you a mortgage. So, be patient during the process and contemplate beginning to rebuild your credit the moment after your bankruptcy has been approved. Thinking ahead provides you with the most effective chance for a great rate in the foreseeable future.