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How Soon Can a First Time Home Buyer Buy After Bankruptcy?

 

bankruptcy first time home buyersA bankruptcy in the recent past does not close the door to first time home buyers. In fact, using the law to get a handle on unmanageable finances through the bankruptcy courts may help put homeownership in sight. If you have high levels of qualifying debt that you have little chance of paying off in a reasonable period, a bankruptcy may give you the relief you need. The current bankruptcy law is more stringent about which chapter for which people qualify, but if the court discharges the debt, first time home buyers can often buy a home within three or four years after the case closes.

Post-Bankruptcy

Open a secured line of credit. It's not likely a credit card company or bank will give you an unsecured credit line for a few years. Choose a company that reports your activity to the credit bureaus and put several hundred dollars into an account as a deposit. Each time you use the card and make payments on time, your credit improves. 

Make other payments on time, like student loans or car payments. These payments help establish that you're a good credit risk. 

Check your credit score three months or more after the bankruptcy to verify that the accounts have all been discharged. If some that you listed on your bankruptcy show they are still open, contact your legal representative who can help you clear the problem up. If you handled the bankruptcy action yourself, contact the company reporting the debt.

Preparing for Home Ownership

Start to save considerable money to use as a down payment for buying a home just after your bankruptcy discharge. The interest rate you'll pay on a mortgage will be higher than if you had good credit. A large down payment helps lower the monthly payment on the home. 

Keep all your bankruptcy papers. The lender may want to review them, along with other legal documentation, to approve your loan. 

Contact a Realtor or several lenders to get pre-approved for a mortgage. Mortgage pre-approval speeds the buying process when buying a home and gives you an advantage with sellers, since they know you're eligible for a mortgage. A trusted mortgage consultant can also help you get your credit and finances on track for you.

Bankruptcy doesn't mean the end of the dreams of first time home buyers to own their own property. Mortgage lenders know that financial problems can be transitory and that bankruptcy is legal solution to overwhelming financial problems. Again, you're probably looking at a 3-to-4 year wait once you're discharged from bankruptcy before you can once again buy a home.

Get on the road to owning a home with "The Road to Mortgage-Ready Credit." The free guide covers more credit tips when it comes to buying a house. Get your free ciopy at the button below.

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(burning money from: Flickr user Images of Money)

Comments

In working with client's that have had a bankruptcy with a foreclosure on a previous mortgage, if that mortgage was an FHA, a person has to wait 3 years "after" the lender had filed the claim with HUD for that defaulted mortgage and I have found that it can take up to 2 years for the lender to file that claim, putting the prospective homebuyer in, with this example being used, a 5 year wait (2 yrs for lender to file claim with HUD and 3 years from the date of the actual claim) so be careful out there when you are telling your client's 2 to 3 years after filing bankruptcy if there was a foreclosure especially on an FHA loan!
Posted @ Wednesday, April 25, 2012 1:17 PM by L A
I filed bankruptcy and it was closed a year ago. I make good money working for the state, but my credit isn't where it needs to be yet. How hard would it be for me to get a first time home owners loan considering I make a decent wage and have a large down payment?
Posted @ Monday, November 05, 2012 7:50 PM by carla sprous
Hi Carla, 
Most mortgage loan options require a 3-to-4 year wait after the bankruptcy discharge. During that time you can repair your credit score, getting yourself ready for a mortgage. It will take time and effort, but it doesn't take as long as some folks think. With that said, sometimes there are situations where you might be considered in less time than that. you would do well to talk to a mortgage consultant in your area. Best of luck! 
Dan Moyle 
AmeriFirst Home Mortgage
Posted @ Tuesday, November 06, 2012 7:38 AM by Dan Moyle
Nice blog. Thanks for providing such a wonderful info. 
Bankruptcy Lawyer 
 
Posted @ Friday, February 21, 2014 4:28 AM by Justin
Thanks for sharing this article to your reader. You give very nice information about this post.. 
 
Online Bankruptcy Class 
Posted @ Wednesday, June 04, 2014 7:09 AM by Josh Kraus
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