Bankruptcy can be an excruciating ordeal while going through it. It is a very long and enduring process and can sometimes take years to recover financially. Even so this shouldn’t prohibit you from buying a home in the future.
Here at The Orlicki Group we help those who have gone through bankruptcy buy homes fairly often. Buying a home after bankruptcy isn’t as difficult as it might appear. Below are some ways you can stay on track when going through it so buying a home after bankruptcy isn’t that big of a chore.
Our preferred credit repair expert Sam Parker of My Credit Guy has some positive things to say about recovery from Bankruptcy:
If recovered from properly, a BK can catapult an individual back into a productive financial life. The key is making sure that you follow a few key steps to making sure that you get the full relief that you were expecting from your bankruptcy.
Sam Parker – My Credit Guy
Know your waiting period and exceptions.
When you file for bankruptcy there is a standard waiting period until you are able to qualify for a mortgage. Each loan program has different period guidelines. As long as you abide by the guidelines, the waiting periods are fairly cut and dry.
Each waiting period differs but here’s a simple breakdown of the timelines for buying a home after bankruptcy:
2019 FHA Waiting Periods:
• TWO (2) years with a Chapter 7 bankruptcy
• ONE (1) year with a Chapter 13 bankruptcy
2019 Conventional Fannie Mae Waiting Periods:
• FOUR (4) years with a Chapter 7 bankruptcy
• TWO (2) years after a Chapter 13 bankruptcy
2019 VA Loan Waiting Periods:
• TWO (2) years with a Chapter 7 bankruptcy
• You must establish 12 months of good credit history
As always there exceptions and other factors and guidelines you must abide by in order to be approved. Just because the waiting period has passed does not make you eligible for a mortgage.
Be prepared to pay a little more.
With any derogatory item on your credit report, including bankruptcy, you are going to see an increase in cost. You’re financial history has marks and until they go away (after several years) you are deemed a riskier investment to a bank.
Rebuild your credit and keep your report clean.
The key factory to buying a home after bankruptcy as we mentioned earlier is to build healthy credit during the waiting period. There are several key factors that you’ll need to keep in mind while building your credit:
- No late payments – This is huge. Try your best to never make a late payment on any of your reporting lines of credit. If you happen to be late over 30 days for one reason or another contact the creditor to see if they can reverse the reporting of the late pay.
- Keep your balances low – Your balances on revolving lines of credit make up a large portion of your overall debt scenario which is a key factor. Keeping balances below 30% on cards and other revolving lines will keep your scores high and save you money when you do decide to buy a home.
- Keep your inquiries in check – Hard inquiries over the course of a calendar year count up for 10% of your credit history. A large amount of inquiries within a short time period can lower your score and show that you’re utilizing your credit appropriately.
After spending some time rebuilding your credit and improving your financial situation, the throws of bankruptcy can be left behind. We also will always advise you of your options but push for affordable mortgages for all of our clients unlike some larger lenders who will attempt to maximize loan amounts and profits. Have more questions? Get in touch with us today to discuss your path to home ownership.
