Can I buy a home with a bankruptcy? – Considering Filing?

If you’re in a position where you might file bankruptcy but want to eventually buy a house, don’t despair! Even though a bankruptcy will reduce your credit score by 200+ points, the damage is not permanent.

After your bankruptcy you’ll want to focus on achieving a perfect payment history with three or more credit references. Additionally, you will typically need to wait two years from the discharge or dismissal of the bankruptcy in order to be considered for a mortgage loan.

It always helps to get letters from anyone with whom you’ve been paying bills on time with (telephone, or other utilities and insurance providers, for example). You never have too many good report of your improved financial responsibility, especially after a bankruptcy.

Naturally, it’s a good idea to keep your job, and ideally the same job from the time of your bankruptcy. Remember, you’re trying to show case your consistency and reliability as much as possible.

As your credit lines begin to come back, be careful not to use too much of what’s available. Keeping the charges you make low will be a strong signal to lenders that you mean business.

One warning I always issue to people is to make sure whatever was causing the problems which led you to consider the bankruptcy, in the first place, have been fully resolved.

Bankruptcy is a serious undertaking. You will be closing the doors on virtually any credit for a time, not to mentions the mark it leaves will remain on your credit report for 10 years. Recurring financial problems become much more difficult to deal with once you’re filed bankruptcy in the past.

Assuming you’ve made all the appropriate post-bankruptcy steps and you’re ready to begin your search, keep the following tips in mind.

Be very wary of sub-prime lenders who charge excessive up from processing fees, pre-payment and other fees. As I often say, if it seems excessive or unfair, it probably is.

Make sure you obtain 3 or more quotes from different lenders. This helps flush out the best deal.

Don’t despair, get creative. If you still need some money for a down payment, consider borrowing it form a friend or relative. After closing, you can often take a second or third mortgage up to the value of the house to repay. (Be sure to disclose any creative maneuvers to your lender)

First-time-buyers. Often there are sate-operated first-time buyer’s programs which can help you get started. A quick internet search can work wonders.

Make sure you’ve exhausted all other options short of bankruptcy before you take this step. Having creditors harassing you can magnify problems that you might normally handle without considering a major bail-out.

Finally, examine your credit report for errors and opportunities. Negotiating toward a clean financial bill has prevented many from filing for bankruptcy. Whatever your choice, take action today – you’ll be glad you did!