There are many people who struggle with their finances but who still want to try to move forward in life. They may want to take out a home loan and start building wealth, but with poor credit, it’s difficult.
Bankruptcy is a good way to eliminate debt and help you get back on solid financial ground, but it can also make it harder to get a mortgage in the short term. Fortunately, having a bankruptcy on your record doesn’t mean that you’ll never be able to buy a home, it just means you may have to wait a little while.
Bankruptcy’s impact on your credit
Bankruptcy does have an impact on your credit. It may remain on your credit report for up to 10 years, which may make lenders wary of lending to you. The good news is that the impact of a bankruptcy lessens over time, so you may be able to get a mortgage sooner than you initially thought.
After a bankruptcy is discharged, you can begin the process of building your credit back up. Your older debts should be removed from your credit report if they were eliminated through bankruptcy.
Check your credit report. There, you’ll find your current credit score as well as a list of any debts that still remain. You may need to wait one or two years from the date of your bankruptcy to seek a mortgage, so between the date of your bankruptcy and when you apply, make sure to make all of your payments on time. This will help you build up your credit score, so you have a better chance of getting a loan with a decent interest rate.
Then, you should consider the kind of loan you want. With a Federal Housing Administration loan, for example, you may be able to get a loan two years after your bankruptcy discharge rate. You may need as little as 3.5% of the cost of the home as a down payment, too, which makes this kind of loan affordable for first-time home buyers and those with lower incomes. Other loans also exist, so once you complete your bankruptcy, consider learning more about them to decide how to build your credit and get the loan you want.