Mortgage after Bankruptcy

January 14, 2009 · Print This Article

Ask The Lender: After a Bankruptcy

Question:
I went through bankruptcy back in January and wonder now what chances, if any, I have to get a home. This may be completely fruitless at this time, but I would like to set some stepping stones so that I would know what I need to do along the way to prepare myself to better be able to get a loan.

Thanks,
Patricia

Answer:
Patricia,

Thanks for the contact. The recent bankruptcy would present the biggest challenge in obtaining a mortgage for buying a home right away. Typically most lenders are looking for 2 years of re-established credit after a bankruptcy is discharged. So while you are going through those re-establishing years, here are a few tips:

Pay everything on time (beyond just credit debts… utilities can help create alternative credit when the time is right)
Pay everything by Check or Debit Card (you want hard proof of timely payments)
If you rent, pay by Check! (This is especially important to prove!)
Open a credit card and use it effectively to re-establish credit (see http://www.bestnewcreditcards.com for more info)
Build a savings account. Lenders like to see money in the bank for a cushion… gives them a sense of security.
Keep debts to a minimum. When you are rebuilding credit, use credit cards (revolving credit) properly and avoid installment loans just to build credit. In other words, don’t buy a car unless you have to. Installment loans take forever to make a positive impact on credit.

These should help get you on track to buy a home again in the near future.