1st Dec 2014
Buying a home after bankruptcy is a struggle many people face. It can be challenging depending on the type of bankruptcy you have filed for. Between Chapter 7 and Chapter 13 bankruptcy, many experts have claimed that Chapter 7 is the better choice for those looking to purchase a home in the future. No matter what your past decisions were, there are a few things to take into consideration. Follow these tips for buying a home after bankruptcy to ensure a positive experience for you.
The Right Time
There is a period of time after filing for bankruptcy that you will not be able to buy a home. This time period is usually anywhere from a year and a half to two years. After this time as you continue to make good financial decisions, your credit score will continue to rise. Consider the advantages of waiting for this credit score to rise. This waiting period will help you earn a lower interest rate on your future home. While the difference may seem small initially, it will add up in interest over the years of your loan.
Build Your Down Payment
No matter your situation it is important to save your money and produce at least some down payment before buying a home, but it becomes increasingly important after bankruptcy. Depending on how soon you decide to buy a home after filing for bankruptcy, you may be required to deliver a higher down payment than other people. As soon as you can begin saving to ensure you can have what you need.
For those looking to buy a home soon after bankruptcy, it will be nearly impossible to get a conventional loan. Instead, an FHA loan will be the best solution for you. There is a program produced by the FHA for those who have bankruptcy in their recent past. You will need to first prove that the bankruptcy was caused by circumstances out of your control, and that there is a good chance it won’t happen again. The approval for the loan in this situation can happen as early as one year after the bankruptcy is discharged. During this year, you should work to build your credit back, helping you to get the best interest rate possible.
Bankruptcy may set you back, but don’t let it keep you down. You can rebound and buy your own home after with a little effort and money management. Make sure you understand the changes that need to be made to purchase your dream home after filing for bankruptcy.